Nehru arts and science college

Department of international business

International Marketing Management

UNIT- 1

International marketing- marketing concepts- orientations- importance –problems- international vs domestic marketing- global marketing- evolution of global marketing.

DEFINE MARKETING AND EXPLAIN NATURE AND SCOPE OF MARKETING.

INTRODUCTION

In today's world of marketing, everywhere you go you are being marketed to in one form or another. Marketing is with you each second of your walking life. From morning to night you are exposed to thousands of marketing messages everyday. Marketing is something that affects you even though you may not necessarily be conscious of it.After reading this you'll understand - what exactly the marketing is, to whom it is beneficial, and what are the nature and scope of marketing.

DEFINITION OF INTERNATIONAL MARKETING

According to American Marketing Association (2004) - "Marketing is an organisational function and set of processes for creating, communicating and delivering value to customers and for managing relationships in a way that benefits both the organisation and the stakeholder." According to Kotler (2000) - "A societal process by which individuals and groups obtain what they need and want through creating, offering, and freely exchanging products and services of value with others."

NATURE OF INTERNATIONAL MARKETING

1. Marketing is an Economic FunctionMarketing embraces all the business activities involved in getting goods and services , from the hands of producers into the hands of final consumers. The business steps through which goods progress on their way to final consumers is the concern of marketing.

2. Marketing is a Legal Process by which Ownership Transfers In the process of marketing the ownership of goods transfers from seller to the purchaser or from producer to the end user. 3. Marketing is a System of Interacting Business Activities Marketing is that process through which a business enterprise, institution, or organisation interacts with the customers and stakeholders with the objective to earn profit, satisfy customers,

and manage relationship. It is the performance of business activities that direct the flow of goods and services from producer to consumer or user.

4. Marketing is a Managerial function According to managerial or systems approach - "Marketing is the combination of activities designed to produce profit through ascertaining, creating, stimulating, and satisfying the needs and/or wants of a selected segment of the market." 

According to this approach the emphasis is on how the individual organisation processes marketing and develops the strategic dimensions of marketing activities. 

5. Marketing is a social process Marketing is the delivery of a standard of living to society. According to Cunningham and Cunningham (1981) societal marketing performs three essential functions:-Knowing and understanding the consumer's changing needs and wants;Efficiently and effectively managing the supply and demand of products and services; andEfficient provision of distribution and payment processing systems.

6. Marketing is a philosophy based on consumer orientation and satisfaction

7. Marketing had dual objectives - profit making and consumer satisfaction Scope of International Marketing

1. Study of Consumer Wants and NeedsGoods are produced to satisfy consumer wants. Therefore study is done to identify consumer needs and wants. These needs and wants motivates consumer to purchase.

2. Study of Consumer behaviourMarketers performs study of consumer behaviour. Analysis of buyer behaviour helps marketer in market segmentation and targeting.

3. Production planning and developmentProduct planning and development starts with the generation of product idea and ends with the product development and commercialisation. Product planning includes everything from branding and packaging to product line expansion and contraction.

4. Pricing PoliciesMarketer has to determine pricing policies for their products. Pricing policies differs form product to product. It depends on the level of competition, product life cycle, marketing goals and objectives, etc.

5. DistributionStudy of distribution channel is important in marketing. For maximum sales and profit goods are required to be distributed to the maximum consumers at minimum cost.

6. PromotionPromotion includes personal selling, sales promotion, and advertising. Right promotion mix is crucial in accomplishment of marketing goals.

7. Consumer SatisfactionThe product or service offered must satisfy consumer. Consumer satisfaction is the major objective of marketing.

8. Marketing ControlMarketing audit is done to control the marketing activities

INTERNATIONAL MARKETING ORIENTATIONS 

Different attitudes towards company’s involvement with international marketing process are called international marketing orientations. Justin Paul and Ramneek Kapoor (2008) underline that “the management’s thinking, philosophy and guiding principles towards the internalization of the company’s operations will divide the level of involvement of the firm’s resources, including its marketing activities and talents”. In this statement Paul and Kapoor talk about the EPRG framework introduced by Wind, Douglas and Perlmutter, who stress that “the key assumption underlying the EPRG framework is that the degree of internalization to which management is committed affects the specific international strategies and decision rules of the firm”. The Perlmutter’s EPRG framework consists of 4 stages in the international operations’ evolution. The EPRG framework includes: 1. Ethnocentric approach; 2. Polycentric approach; 3. Regiocentric approach; 4. Geocentric approach; Ethnocentric Approach 

Ethnocentric approach underlines host countries superiority. In other words, it is associated with orientation directed first of all at the home country management, “the home country knows best culture is applied” (Bowie and Buttle, 2004). Overseas operations are considered only as an additional extension of the local market.

The example of such change is NISSAN which in the first years of its existence on international arena was following ethnocentric approach by selling its cars abroad exactly as they were sold in their domestic market in Japan, after several years of its international trading the company realized that ethnocentric international marketing orientation is no longer relevant for some industries including automobile industry in which they were operating and changed its approach to polycentric

Polycentric Approach 

A company following this orientation gives an equal importance to every country’s domestic market, as there is a belief in uniqueness of every market and its need to be addressed in an individual way. “The plans are devised to operate through individually established businesses, i.e. either by wholly owned subsidiaries or through marketing subsidiaries, separately in each country, allowing complete autonomy to units to operate as separate profit centres independent of head office”

Examples of companies marketing their brands according to this approach are: Ford Motors, Suzuki, Toyota, General Motors, Nissan, etc. – all these companies adapt their brands to specific needs of each country’s consumer. Regiocentric Approach 

In this approach segmentation of the markets is fulfilled on the basis of similarities in terms of regions. A company finds economic, cultural or political similarities among regions in order to cover the similar needs of potential consumers.

For example, countries of former USSR can form one group as needs and tastes of consumers of these countries are very similar as they were representatives of one nation not so long ago. The same products and strategies can be used in such set of countries like Denmark, Norway, Finland and Sweden or Pakistan, Bangladesh and India as they possess a strong regional identity and belong to the same cultural dimensions. Pepsi and Coca-Cola are examples of international companies which are successfully using this international marketing orientation. Geocentric Approach 

This orientation favours neither home country nor foreign countries where the company operates. It is also called a global approach the main idea of which is to target “global consumers” who have similar tastes.

The main idea of this orientation is to borrow from every country what is best. The limitation is that it fully depends on constant global market research, which requires a lot of investment and time. This approach is for companies with an impressive capital that want “to become world leaders”... , in this quest “...manufacturers offer homogeneous, identifiable and often interchangeable services and products in order to integrate them for worldwide operational efficiency” (Paul, 2008).

The European Silicon Structures is a pure example of geocentric international marketing orientation: the company is incorporated in Luxembourg, its headquarter was established in Munich, research facilities are in England, and France has its factory; the company went even further by assigning its eight directors from seven different countries

IMPORTANCE OF INTERNATIONAL MARKETING

International Marketing is the multinational process of planning and executing the conception,pricing, promotion,and distribution of ideas,goods and services to create exchanges that satisfy individual and organizational objectives.Now follows the importance of international marketing:

A)Importance from the consumer's point of view:

Consumption of unpronounced goods Consumption of goods at a low price Enjoying benefits of competition Consumption of new products Increase in consumption

B)Importance from the producer's point of view: Export of surplus production Expansion of market in foreign countries Production of goods at a low cost Increase in production More profitable Reduce business risk Reduce cost

C)Importance from economic point of view: Increases total production Increases export earnings Challenging natural calamities knowledge and cultural progress Increases international peace and assistantship Extension of industry Export of unusual goods Optimum utilization of natural resources Progress in technological knowledge Image development.

SPECIAL PROBLEMS IN INTERNATIONAL MARKETING

(1)  Political and Legal Differences: The political and legal environment of foreign markets is different. The complexity generally increases as the number of countries in which a company does business increases. The political and legal environment is not the same in all provinces of many home markets. For example, the political and legal environment is not exactly the same in all the states of India. (2)  Cultural differences: Cultural differences pose one of the most difficult problems in international marketing. It is essential to understand cultural differences to formulate successful marketing strategies. However, many domestic markets, are also not free from cultural diversity.

(3)  Currency unit differences: The currency unit differs from nation to nation. This may sometimes cause problems of currency convertibility, besides the problems of exchange rate fluctuations. There may be differences also in the monetary system and regulations. 

(4)  Language differences: An international marketer often faces problems due to language differences. Even when the same language is used in different countries, the same words or terms may have different meanings. However, the language problem is not something peculiar to international marketing. For example, the multiple languages in India. (5)  Marketing Infrastructure Differences: The availability and nature of marketing facilities available in different countries may differ widely. For example, an advertising medium very effective in one market may not be available, or may be underdeveloped, in another market. (6)  High Costs of Distance: When the markets are far removed by distance, the transport cost becomes high and the time required for the delivery tends to become longer. Distance tends to increase certain other costs also.

DIFFERENCE BETWEEN INTERNATIONAL AND DOMESTIC MARKETING

  International Marketing Domestic Marketing

1. Meaning

It refers to those activities which results into transfers of goods and services from one country to another.

It refers to those activities which results into transfers of goods and services inside the country itself.

2. BarriersInternational trade is characteristics by tariff and non tariff barriers.

Domestic marketing has no such restrictions.

3. CurrenciesIt involves exchange on the basis of different currencies.

It involves exchange in the basis of same currencies.

4.Government    Interference

Exchange takes place under government rules and regulations. There is high degree of government interference.

Government in interference is zero or minimum only incase of essential commodities.

5. Culture

Trade should be done taking diverse into consideration. Even things like colour combination can be affect the trade.

Culture does not affect in domestic marketing.

6.Mode of PaymentLetter of credit is normally as mode of payment.

Cash, Cheques, DD’s are the most common.

7.Mobility of Factors of Production

Factors of Production are relatively immobile as compared to domestic marketing.

Domestic Trade enjoys greater mobility in factors of production.

8. CompetitionInternational Trade is subject to intense competition.

Competition is not as intense as it is in international marketing.

9. DocumentationInternational Marketing is subject to complex documentation

Domestic trade does not involve much of documentation.

10. Risk

International Marketing is subject to high risk. Political, foreign exchange risk, bad debt risk are few of them.

Domestic Marketing is also subject to risk but not as high as international marketing.

GLOBAL MARKETING

Global marketing is a firm's ability to market to almost all countries on the planet. With extensive reach, the need for a firm's product or services is established. The global firm retains the capability, reach, knowledge, staff, skills, insights, and expertise to deliver value to customers worldwide. The firm understands the requirement to service customers locally with global standard solutions or products, and localizes that product as required to maintain an optimal balance of cost, efficiency, customization and localization in a control-customization continuum to best meet local, national and global requirements to position itself against or with competitors, partners, alliances, substitutes and defend against new global and local market entrants per country, region or city. The firm will price its products appropriately worldwide, nationally and locally, and promote, deliver access and information to its customers in the most cost-effective way. The firm also needs to understand, research, measure and develop loyalty for its brand and global brand equity (stay on brand) for the long term.

At this level, global marketing and global branding are integrated. Branding involves a structured process of analyzing "soft" assets and "hard" assets of a firm's resources. The strategic analysis and development of a brand includes customer analysis (trends, motivation, unmet needs, segmentation), competitive analysis (brand image/brand identity, strengths, strategies, vulnerabilities), and self-analysis (existing brand image, brand heritage, strengths/capabilities, organizational values).

Further, Global brand identity development is the process establishing brands of products, the firm, and services locally and worldwide with consideration for scope, product attributes, quality/value, uses, users and country of origin; organizational attributes (local vs. global); personality attributes (genuine, energetic, rugged, elegant) and brand customer relationships (friend, adviser, influencer, trusted source); and importantly symbols, trademarks metaphors, imagery, mood, photography and the company's brand heritage. In establishing a global brand, the brand proposition (functional benefits, emotional benefits and self-expressive benefits are identified, localized and streamlined to be consistent with a local, national, international and global point of view. The brand developed needs to be credible.

A global marketing and branding implementation system distributes marketing assets (website, social media, Google PPC, PDFs, sales collateral, press junkets, kits, product samples, news releases, local mini-sites, flyers, posters, alliance and partner materials, affiliate programs and materials, internal communications, newsletters, investor materials, event promotions and trade shows to deliver an integrated, comprehensive and focused communication, access and value to the customers, that can be tracked to build loyalty, case studies and further establish the company's global marketing and brand footprint.

Global marketing specializationGlobal marketing is a field of study in general business management to provide valuable

products, solutions and services to customers locally, nationally, internationally and worldwide. Elements of the global marketing

Not only do standard marketing approaches, strategies, tactics and processes apply, global marketing requires an understanding of global finance, global operations and distribution,

government relations, global human capital management and resource allocation, distributed technology development and management, global business logic, interfirm and global competitiveness, exporting, joint ventures, foreign direct investments and global risk management.

The standard “Four P’s” of marketing: product, price, placement, and promotion are all affected as a company moves through the five evolutionary phases to become a global company. Ultimately, at the global marketing level, a company trying to speak with one voice is faced with many challenges when creating a worldwide marketing plan. Unless a company holds the same position against its competition in all markets (market leader, low cost, etc.) it is impossible to launch identical marketing plans worldwide.

Product

A global company is one that can create a single product and only have to tweak elements for different markets. For example, Coca-Cola uses two formulas (one with sugar, one with corn syrup) for all markets. The product packaging in every country incorporates the contour bottle design and the dynamic ribbon in some way, shape, or form. However, the bottle can also include the country’s native language and is the same size as other beverage bottles or cans in that same country.

Price

Price will always vary from market to market. Price is affected by many variables: cost of product development (produced locally or imported), cost of ingredients, cost of delivery (transportation, tariffs, etc.), and much more. Additionally, the product’s position in relation to the competition influences the ultimate profit margin. Whether this product is considered the high-end, expensive choice, the economical, low-cost choice, or something in-between helps determine the price point.

Placement

How the product is distributed is also a country-by-country decision influenced by how the competition is being offered to the target market. Using Coca-Cola as an example again, not all cultures use vending machines. In the United States, beverages are sold by the pallet via warehouse stores. In India, this is not an option. Placement decisions must also consider the product’s position in the market place. For example, a high-end product would not want to be distributed via a “dollar store” in the United States. Conversely, a product promoted as the low-cost option in France would find limited success in a pricey boutique.

Promotion

After product research, development and creation, promotion (specifically advertising) is generally the largest line item in a global company’s marketing budget. At this stage of a company’s development, integrated marketing is the goal. The global corporation seeks to reduce costs, minimize redundancies in personnel and work, maximize speed of implementation, and to

speak with one voice. If the goal of a global company is to send the same message worldwide, then delivering that message in a relevant, engaging, and cost-effective way is the challenge.Effective global advertising techniques do exist. The key is testing advertising ideas using a marketing research system proven to provide results that can be compared across countries. The ability to identify which elements or moments of an ad are contributing to that success is how economies of scale are maximized. Market research measures such asFlow of Attention, Flow of Emotion and branding moments provide insights into what is working in an ad in any country because the measures are based on visual, not verbal, elements of the ad.

Advantages and Disadvantages

Advantages

The advantages of global market we can introduce our product by using advertising: Economies of scale in production and distribution Lower marketing costs Power and scope Consistency in brand image Ability to leverage good ideas quickly and efficiently Uniformity of marketing practices Helps to establish relationships outside of the "political arena" Helps to encourage ancillary industries to be set up to cater for the needs of the global

player Benefits of eMarketing over traditional marketing

Disadvantages

Differences in consumer needs, wants, and usage patterns for products Differences in consumer response to marketing mix elements Differences in brand and product development and the competitive environment Differences in the legal environment, some of which may conflict with those of the home

market Differences in the institutions available, some of which may call for the creation of

entirely new ones (e.g. infrastructure) Differences in administrative procedures Differences in product placement. Differences in the administrative procedures and product placement can occur

Evolution to Global and International Marketing

A company who wants to be globalized has to go to several steps, those steps are:1. 

Domestic Marketing Domestic marketing is the first stage of the evolution of a company to become global. In this stage the marketing scope of the company is only within the country boundaries. In this stage, the company only focuses on how to fulfill the local customers. It also means that they only attract and influence the local market. Companies who still in this stage are

usually ethnocentric ad seldom pay attention in how the world has changed. It means, they seldom pay attention in the changing of customer preferences globally, never pay attention on emerging competition, and those better products that will arrived soon in the domestic market that may also become the competitors of their own product.2. Export marketing The second stage is export marketing. Export marketing is an approach in which sell directly to overseas customers. It means, the manufacturing processes are done locally but the company sells it both domestically and to selected target market in other countries. This is the

 Early stage of a company to become more internationalized. There are actually 2 types of export marketing. Those are indirect and direct exporting. Indirect marketing is where the company is relying on those 3rd party companies to handle and distribute the products from the company. In other hand, direct exporting is a method where the involvement level of a company is higher. It means, the company sells directly to the customers overseas.3. 

International marketingThe third stage of the evolution is international marketing. The difference on this stage is the company is getting more polycentric orientation. Not like the export marketing where the focus is still on local market, in this international marketing stage, the basic factor that been used to customized the product is those customers from other countries. A proper example of international marketing is when a company manufactures products in one certain country but they considered their neighborhood country as their market too. For instance, when F&N a beverages manufacturer from Singapore, their manufacturing plant is only in Singapore but their market is not only Singapore, but also Indonesia, Malaysia, Thailand, etc.4. 

Multinational marketingIn this stage the focus of the company is more on the regional basis. It means, they will customize the products base on the region-wide customers‟ preferences. In this stage thecompany starts to realize economies of scale by standardizing the operations on a regionalbasis. In multinational marketing level companies have their manufacturing plant all over theregion and they consider the whole world as their market.5. 

Global marketing This is the last stage of the evolution. There are only few company that can actually achieve and evolutes until this stage. It is a marketing approach in which companies are actually standardizing all their marketing mix across the national, regional, and global markets. There are 3 main activities in this stages which are standardization efforts, coordination a cross markets, and global integration. In global marketing the manufacturing plants that the companies have are spread all over the world and their targeted markets are every place in the world or so called global market.In my opinion based on the steps „definition, it is necessary yet easier for companies to actually go through every steps before they actually become a global company. However,there are several companies that actually can simply become a global company without the need to go through each steps and mainly it is because the improvement and development in technologies such as internet. Company like Google, Facebook, Twitter, and Yahoo, they can actually skip some steps in the evolution to global marketing. However, it is difficult for the rest of the business to do so. Like for example The

Coca Cola Company which is considered their business as one of the leading in the F&B industry.

INTERNATIONAL MARKETING-DEFINITION

Introduction to International Marketing

International marketing is simply the application of marketing principles to more than one country. However, there is a crossover between what is commonly expressed as international marketing and global marketing, which is a similar term. For the purposes of this lesson on international marketing and those that follow it, international marketing and global marketing are interchangeable.

The intersection is the result of the process of internationalisation. Many American and European authors see international marketing as a simple extension of exporting, whereby the marketing mix is simply adapted in some way to take into account differences in consumers and segments. It then follows that global marketing takes a more standardised approach to world markets and focuses upon sameness, in other words the similarities in consumers and segments. So let's take a look at some generally accepted definitions.

International marketing (IM) or global marketing refers to marketing carried out by companies overseas or across national borderlines. This strategy uses an extension of the techniques used in the home country of a firm. It refers to the firm-level marketing practices across the border including market identification and targeting, entry mode selection, marketing mix, and strategic decisions to compete in international markets. According to the American Marketing Association (AMA) "international marketing is the multinational process of planning and executing the conception, pricing, promotion and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives." In contrast to the definition of marketing only the word multinational has been added. In simple words international marketing is the application of marketing principles to across national boundaries. However, there is a crossover between what is commonly expressed as international marketing and global marketing, which is a similar term.

The intersection is the result of the process of internationalization. Many American and European authors see international marketing as a simple extension of exporting, whereby the marketing mix 4P's is simply adapted in some way to take into account differences in consumers and segments. It then follows that global marketing takes a more standardised approach to world markets and focuses upon sameness, in other words the similarities in consumers and segments.

What is International Marketing?

"At its simplest level, international marketing involves the firm in making one or more marketing mix decisions across national boundaries. At its most complex level, it involves the firm in establishing manufacturing facilities overseas and coordinating marketing strategies across the globe."

What is Global Marketing?

"Global marketing refers to marketing activities coordinated and integrated across multiple country markets."

DIFFERENCES BETWEEN DOMESTIC MARKETING AND INTERNATIONAL MARKETING:

There are various differences between domestic marketing and international marketing. Due to a language barrier it is more difficult to obtain and interpret research data in international marketing. Promotional messages needs to consider numerous cultural differences between different countries. This includes the differences in languages, expressions, habits, gestures, ideologies and more. For example, in the United States the round O sign made with thumb and first finger means "okay" while in Mediterranean countries the same gesture means "zero" or "the worst". In Tunisia it is understood as "I'll kill you" meanwhile for a Japan consumer it implies "money". Even among the 74 English-speaking nations a word with the same meaning can differ greatly from the English which is spoken in the United States as the following example shows:

Mode of engagement in foreign markets:

After the decision to invest has been made, the exact mode of operation has to be determined. The risks concerning operating in foreign markets is often dependent on the level of control a firm has, coupled with the level of capital expenditure outlayed. The principal modes of engagement are listed below:

Exporting (which is further divided into direct and indirect exporting) Joint ventures Direct investment (split into assembly and manufacturing) Exporting

Direct exporting involves a firm shipping goods directly to a foreign market. A firm employing indirect exporting would utilise a channel/intermediary, who in turn would disseminate the product in the foreign market. From a company's standpoint, exporting consists of the least risk. This is so since no capital expenditure, or outlay of company finances on new non-current assets, has necessarily taken place. Thus, the likelihood of sunk costs, or general barriers to exit, is slim. Conversely, a company may possess less control when exporting into a foreign market, due to not control the supply of the good within the foreign market.

Joint ventures

A joint venture is a combined effort between two or more business entities, with the aim of mutual benefit from a given economic activity. Some countries often mandate that all foreign investment within it should be via joint ventures (such as India and the People's Republic of China). By comparison with exporting, more control is exerted, however the level of risk is also increased.

Direct investment

In this mode of engagement, a company would directly construct a fixed/non-current asset within a foreign country, with the aim of manufacturing a product within the overseas market. Assembly denotes the literal assembly of completed parts, to build a completed product. An example of this is the Dell Corporation. Dell possesses plants in countries external to the United States of America, however it assembles personal computers and does not manufacture them from scratch. In other words, it attains parts from other firms, and assembles a personal computer's constituent parts (such as a motherboard, monitor, CPU, RAM, wireless card, modem, sound card, etc.) within its factories. Manufacturing concerns the actual forging of a product from scratch. Car manufacturers often construct all parts within their plants. Direct investment has the most control and the most risk attached. As with any capital expenditure, the return on investment (defined by the payback period, Net Present Value, Internal Rate of Return, etc.) has to be ascertained, in addition to appreciating any related sunk costs with the capital expenditure.

Unit – II

Analyzing marketing opportunities – the marketing process- product planning – analyzing consumer markets and buyer behavior- influencing buyer behavior- the buying decision process- stages of the buying decision process.

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The Marketing ProcessOnce the strategic plan has defined the company's overall mission and objectives,

marketing plays a role in carrying out these objectives.The marketing process is the process of analyzing

market opportunities, selecting target markets,developing the marketing mix, and managing the marketing effort. Target customers stand at thecenter of the marketing process. There are following steps in Marketing Process:

5. Analyzing marketing opportunities6. Selecting target markets7. Developing the marketing Mix8. Managing the marketing effort

a. Analyzing marketing opportunitiesFirst step of the marketing process is analyzing market opportunities and availing these

opportunities to satisfy the customer'srequirementsto have competitive advantage. The marketingfunction of analyzing market opportunities is important in the marketing planning process. Anymarketing manager must analyses the long-run opportunities in the marketto improve the businessunit's performance.To evaluate its opportunities firms needs to operate a reliable marketing information system.

Marketing research isan indispensable marketing tool for this purpose. Researching the market allows the company to gather information about their customers, competitors and anyenvironmental changes to determine the market opportunities. Once the market opportunitieshave been analyzed then modern marketing practice calls for dividing the market into majormarket segments, evaluating each segment, and selecting and targeting those market segments that the company can best serve.

b. Selecting the target Market:To succeed in today's competitive marketplace, companies must be

customer centered. They mustwin customers from competitors and keep them by delivering greater value.·  

Sound marketing requires a careful, deliberate analysis of consumers.Since companies cannot satisfy all consumers in a given market, they must divide up thetotal market (market segmentation), choose the best segments (market targeting), anddesign strategies for profitably serving chosen  segments better than the competition(market positioning).

Market segmentation is the process of dividing a market into distinct groups of buyers with differentneeds, characteristics, or behavior who might require separate  products or marketing mixes.

Market targeting is the process of evaluating each market segment's attractiveness and selecting oneor more segments to enter. A company should target segments in which it can generate the greatest customervalue and sustain it over time. A company may decide to serve only one or a few specialsegments, or perhaps it might decide to offer a complete range of products to serve all marketsegments. Special segments may be called "market niches." Most companies enter a new marketby serving a single segment, and if this proves successful, they add segments.Market positioning is arranging for a product to occupy a clear distinctive and desirable place relative to competing products in the minds of target consumers. In positioning a product, a companyfirst needs to identify possible competitive advantages upon which to build the position. To gaincompetitive advantage, the company must offer greater competitive advantage to the targetsegment. The company's entire marketing program should support the chosen positioning strategy.Effective positioning begins with actually differentiating the company's marketing offer so that it gives consumers more value than they are offered by the competition

c. Developing the Marketing Mix

Once the company has decided on its overall competitive marketing strategy, it isready to begin planning the details of the marketing mix. The marketing mix is the set of controllable

marketing variables that the firm blends to produce the response it wants in the target market. Themarketing mix consists of everything that the firm can do to influence the demand for its product.

These variables are often referred to as the "four Ps."1). Product stands for the "goods-and-service" combination the company offers to the targetmarket.2). Price stands for the amount of money customers have to pay to obtain the product.3). Place stands for company activities that make the product available to target consumers.4). Promotion stands for activities that communicate the merits of the product and persuadetarget consumers to buy it.An effective marketing program blends all of the marketing mix elements into a coordinatedprogram designed to achieve the company's marketing objectives by delivering value to consumers.

Some critics feel that the four Ps omit or underestimate certain important activities.1). "Where are services?" they ask.2). "Where is packaging?"3). The 4 Ps seems to take the seller's view rather than the buyer's view.4). Perhaps a better classification would be the 4 Cs:a). Product = Customer Solution.b). Price = Customer Cost.c). Place = Convenience.d). Promotion = Communication.d. Managing the Marketing EffortThe company wants to design and put into action the marketing mix that will best achieve itsobjectives in target markets. This involves four marketing management functions. The fourfunctions are: analysis, planning, implementation, and control.

The 4 Steps of a Successful Marketing Process

Whether you’re working on a high-level marketing plan or the details of a particular marketing campaign, there are four steps that you need to follow if you want the marketing process to be successful.

Of course, the real starting point of the marketing process is always your overall business goals, since your marketing program will be designed to help you accomplish these. Once your business goals are defined, here are the four steps of a successful marketing process:1. Discovery.  What’s going on in your marketplace? What are the best target markets for your

product or service? Where are your current customers located? What is your competition doing? Discovery is all about doing your research and performing a detailed market, customer and competitive analysis. Taking the time to do this will ensure that your plans are based on metrics and reality rather than on gut feelings and wishful thinking.

2. Strategy.  All of the information you gather in step #1 is then used to help make your decisions as you create your marketing plans – your roadmap to success. How will you go to market? What is your overall marketing strategy and what are your individual campaign strategies? Before you move forward you’ll need to clearly define goals and objectives, determine the appropriate marketing channels, develop your messaging, plan your timing, etc.

3. Implementation.  This, of course, is the “meat” of the marketing process. Implementation is where you put your targeted, cost-effective marketing campaigns into action. Before you implement, though, you need to be sure that you have all of the pieces in place. Do you have the resources to complete the implementation in-house, or do you need to bring in third-party vendors to get the job done? Have you thought of all of the information you need to collect from responders in order to allow for back-end campaign metrics, and put systems in place to ensure this data is captured? Is everyone in the company aware of the campaign? Have you double-checked that the campaign phone numbers work? And so forth.

4. Measurement. The measurement phase of the marketing process is where you take a close look at the results of the campaign in order to refine your strategies before moving forward. Measuring results enables you to make intelligent decisions regarding how to allocate resources for the next go-round.Did the campaign achieve its stated goals? If your goal was sales, for example, how many sales did you get? How much did each person spend? Which products did they buy? Which elements of your marketing program did they respond to? If you were running a test of some element of your marketing campaign (see The Value of Testing), which version got the best results?

PRODUCT PLANNING

Product Planning is the ongoing process of identifying and articulating market requirements that define a product’s feature set. Product planning serves as the basis for decisions about price, distribution and promotion. Product planning is the process of creating a product idea and following through on it until the product is introduced to the market. Additionally, a small company must have an exit strategy for its product in case the product does not sell. Product planning entails managing the product throughout its life using various marketing strategies, including product extensions or improvements, increased distribution, price changes and promotions.

Phases of product planning

Developing the product concept

The first phase of product planning is developing the product concept. Marketing managers

usually create ideas for new products by identifying certain problems that consumers must solve

or various customer needs. For example, if we take a small computer retailer may see the need to

create a computer repair division for the products it sells. After the product idea is conceived,

managers will start planning the dimensions and features of the product. Some small companies

will even develop a product mock-up or model.

Studying the market

The next step in the product plAnning process is studying the competition. Most small

companies will order secondary research information from vendors such as the NPD Group and

Forrester Research. Secondary research usually provides details on key competitors and their

market share, which is the percent of total sales that they hold in the marketplace. Some

companies may also do a SWOT analysis (strengths, weaknesses, opportunities and threats),

according to NetMBA.com, which will help them compare their strengths and weaknesses

against those of key competitors. The business can then determine places in which it has an

advantage over the competition to identify areas of opportunity. For example, a small company

with a high-quality image may be able to find additional markets for its products.

Market research

A small company should consider doing both qualitative and quantitative marketing research for

its new product. Focus groups are an example of qualitative information. Focus groups allow

companies to ask their consumers about their likes and dislike of a product in small groups. A

focus group allows the company to tweak the product concept before testing it through phone

surveys—a more quantitative marketing research function. Phone surveys enables a company to

test its product concept on a larger scale, the results of which are more predictable across the

general population. Qualitative research is a method of inquiry employed in many different

academic disciplines, traditionally in the social sciences, but also in market research and further

contexts.Qualitative researchers aim to gather an in-depth understanding of human behavior and

the reasons that govern such behavior. The qualitative method investigates the why and how of

decision making, not just what, where, when. Hence, smaller but focused samples are more often

used than large samples. quantitative research refers to the systematic empirical investigation of

social phenomena via statistical, mathematical or numerical data or computational techniques.

The objective of quantitative research is to develop and employ mathematical models, theories

and/or hypotheses pertaining to phenomena.

Product introduction

If the survey results prove favorable, the company may decide to sell the new product on a small

scale or regional basis. During this time, the company will distribute the products in one or more

cities. The company will run advertisements and sales promotions for the product, tracking sales

results to determine the products potential success. If sales figures are favorable, the company

will then expand distribution even further. Eventually, the company may be able to sell the

product on a national basis.

Product life cycle

Product planning must also include managing the product through various stages of its product

life cycle. These stages include the introduction, growth, maturity and decline stages. Sales are

usually strong during the growth phase, while competition is low. However, continued success of

the product will pique the interest of competitors, which will develop products of their own. The

introduction of these competitive products may force a small company to lower its price. This

low pricing strategy may help prevent the small company from losing market share. The

company may also decide to better differentiate its product to keep its prices steady. For

example, a small cell phone company may develop new, useful features on its cell phones that

competitors do not have.

Analyzing Consumer Markets and Buyer Behavior

Objectives

Determine how cultural, social, personal, and psychological factors influence consumer buying behavior.

Describe how the consumer makes a purchasing decision

Consumer Behavior

The field of Consumer Behavior:

“studies how individuals, groups, and organizations select, buy, use, and dispose of goods, services, ideas, or experiences to satisfy their needs and desires

How and Why Consumers Buy

Buying behavior is influenced by:

– Cultural factors

– Social factors

– Personal factors

– Psychological factors

Cultural:-

Exert broadest and deepest influence

Culture

Subculture

Social classes

Major U.S. Social Classes

Upper Uppers Lower Uppers Upper Middles

Middle Class Working Class Upper Lowers Lower Lowers

Social

Reference groups

Membership

Primary vs. secondary

Aspirational vs. dissociative

Family

Social roles and statuses

Personal

Age

Stage in life cycle

Occupation

Economic circumstances

Lifestyle

Personality

Self-concept

VALS 2 classifies U.S. adults into eight psychographic groups

Actualizers

Fulfilleds

Achievers

Experiencers

Believers

Strivers

Makers

Strugglers

Psychological

Motivation

Perception

Learning

Beliefs

Attitudes

In addition to understanding how these factors influence consumers, marketers must identify and understand:

Who makes the buying decision

The types of buying decisions

The stages in the buying process

Understand

Buying roles

Buying behavior

Buying decision process

Buying roles

Initiator

Influencer

Decider

Buyer

User

Buying behavior

Complex buying behavior

Dissonance-reducing buying behavior

Habitual buying behavior

Variety-seeking buying behavior

Buying decision process

Problem recognition

Information search

Evaluation of alternatives

Purchase decision

Postpurchase behavior

Postpurchase Behavior:

– Consumers’ expectations are compared to performance

– Postpurchase satisfaction influences future behavior

Purchasing behavior

Word-of-mouth communications

Marketers should attempt to influence and monitor postpurchase behavior

– Postpurchase communications reduce dissonance, returns, and order cancellations

– Talk with customers to discover new uses for existing products

– Investigate methods of product disposal

Buying decision process

A buying decision process (or cost–benefit analysis) describes the process a customer goes through when buying a product. This buying decision model has gone through lots of interpretation by scholars. Although the models vary, there is a common theme of five stages in the decision process.

Stages

The stages are:

1. Problem/Need recognition

2. Information search

3. Evaluation of alternatives

4. Purchase decision

5. Post-purchase behavior

These five stages are a good framework to evaluate customers' buying decision process.

However, it is not necessary that customers get through every stage, nor is it necessary that they

proceed in any particular order. For example, if a customer feels the urge to buy chocolate, he or

she might go straight to the purchase decision stage, skipping information search and evaluation

Problem/need-recognition

Problem/Need-recognition is the first and most important step in the buying decision. Without

the recognition of the need, a purchase cannot take place. The need can be triggered by internal

stimuli (e.g. hunger, thirst) or external stimuli (e.g. advertising). [4]  Maslow held that needs are

arranged in a hierarchy. According to Maslow's hierarchy, only when a person has fulfilled the

needs at a certain stage, can he or she move to the next stage. The problem must be addressed

through the products or services available. It's how the problem must be recognized.

Information search

The information search stage is the next step that the customers may take after they have

recognized the problem or need in order to find out what they feel is the best solution. This is the

buyers' effort at searching the internal and external business environments to identify and

observe sources of information related to the focal buying decision.[5]Consumers can rely on

print, visual, and/or voice media for getting information.

Evaluation of alternatives

At this stage, consumers evaluate different products/brands on the basis of varying product

attributes, and whether these can deliver the benefits that the customers are seeking. [4]  This stage

is heavily influenced by one's attitude, as "attitude puts one in a frame of mind: liking or

disliking an object, moving towards or away from it".[4]  Another factor that influences the

evaluation process is the degree of involvement. For example, if the customer involvement is

high, then he/she will evaluate a number of brands; whereas if it is low, only one brand will be

evaluated.

Customer involvement High Medium Low

Characteristics High Medium Low

Number of brands examined Many Several One

Number of sellers considered Many Several Few

Number of product attributes evaluated Many Moderate One

Number of external information sources

usedMany Few None

Time spent searching Considerable Little Minimal

Purchase decision

This is the fourth stage, where the purchase takes place. According to Kotler, Keller,

Koshy and Jha (2009),[4] the final purchase decision can be disrupted by two factors: negative

feedback from other customers and the level of motivation to comply or accept the feedback. For

example, after going through the above three stages, a customer chooses to buy a Nikon

D80 DSLR camera. However, because his good friend, who is also a photographer, gives him

negative feedback, he will then be bound to change his preference. Secondly, the decision may

be disrupted due to unanticipated situations such as a sudden job loss or the closing of a retail

store.

Post-purchase behavior

These stages are critical to retain customers. In short, customers compare products with

their expectations and are either satisfied or dissatisfied. This can then greatly affect the decision

process for a similar purchase from the same company in the future, mainly at the information

search stage and evaluation of alternatives stage. If customers are satisfied, this results in brand

loyalty, and the information search and evaluation of alternative stages are often fast-tracked or

skipped completely. As a result, brand loyalty is the ultimate aim of many companies.

On the basis of either being satisfied or dissatisfied, a customer will spread either positive

or negative feedback about the product. At this stage, companies should carefully create positive

post-purchase communication to engage the customers.

Also, cognitive dissonance (consumer confusion in marketing terms) is common at this stage;

customers often go through the feelings of post-purchase psychological tension or anxiety.

Questions include: "Have I made the right decision?", "Is it a good choice?", etc.

THE 4 FACTORS INFLUENCING CONSUMER BEHAVIOR

The factors influencing consumer behaviorThere are 4 main types of factors influencing consumer behavior: cultural factors, social

factors, personal factors and psychological factors.I. Cultural factors

Cultural factors are coming from the different components related to culture or cultural environment from which the consumer belongs.Culture and societal environment:

o Culture is crucial when it comes to understanding the needs and behaviors of an individual.

Throughout his existence, an individual will be influenced by his family, his friends, his cultural environment or society that will “teach” him values, preferences as well as common behaviors to their own culture.

o For a brand, it is important to understand and take into account the cultural factors inherent to each market or to each situation in order to adapt its product and its marketing strategy. As these will play a role in the perception, habits, behavior or expectations of consumers.

o For example, in the West, it is common to invite colleagues or friends at home for a drink or dinner. In Japan, on the contrary, invite someone home does not usually fit into the local customs. It is preferable to do that this kind of outing with friends or colleagues  in restaurant.

A significant specificity to take into account for the brands in markets such as savory snacking or sodas and alcoholic beverages. Usage and consumption moments are not the same in all regions of the world.

o While if a Japanese offer you a gift, the courtesy is to offer him an equivalent gift in return.

o McDonald’s is a brilliant example of adaptation to the specificities of each culture and each market. Well aware of the importance to have an offer with specific products to meet the needs and tastes of consumers from different cultures, the fast-food giant has for example: a McBaguette in France

Sub-cultures :

o A society is composed of several sub-cultures in which people can identify. Subcultures are groups of people who share the same values based on a common experience or a similar lifestyle in general.

S ubcultures are the nationalities, religions, ethnic groups, age groups, gender of the individual, etc..

o The subcultures are often considered by the brands for the segmentation of a market in order to adapt a product or a communication strategy to the values or the specific needs of this segment.

o For example in recent years, the segment of “ethnic” cosmetics has greatly expanded. These are products more suited to non-Caucasian populations and to types of skin pigmentation for african, arab or indian populations for example.

o It’s a real brand positioning with a well-defined target in a sector that only offered makeup products to a caucasian target until now (with the exception of niche brands) and was then receiving critics from consumers of different origin.

Brands often communicate in different ways, sometimes even create specific products (sometimes without significant intrinsic difference) for the same type of product in order to specifically target an age group, a gender or a specific sub-culture.

o Consumers are usually more receptive to products and marketing strategies that specifically target them.

Social classes:

o Social classes are defined as groups more or less homogenous and ranked against each other according to a form of social hierarchy. Even if it’s very large groups, we usually find similar values, lifestyles, interests and behaviors in individuals belonging to the same social class.

o We often assume three general categories among social classes : lower class, middle class and upper class.

o People from different social classes tend to have different desires and consumption patterns. Disparities resulting from the difference in their purchasing power, but not only. According to some researchers, behavior and buying habits would also be a way of identification and belonging to its social class.

o Beyond a common foundation to the whole population and taking into account that many counterexample naturally exist, they usually do not always buy the same products, do not choose the same kind of vacation, do not always watch the

same TV shows, do not always read the same magazines, do not have the same hobbies and do not always go in the same types of retailers and stores.

o For example, consumers from the middle class and upper class generally consume more balanced and healthy food products than those from the lower class.

• They don’t go in the same stores either. If some retailers are, of course, patronized by everyone, some are more specifically targeted to upper classes such as The Fresh Market, Whole Foods Market, Barneys New York or Nordstrom. While others, such as discount supermarkets, attract more consumers from the lower class.

o Some studies have also suggested that the social perception of a brand or a retailer is playing a role in the behavior and purchasing decisions of consumers.

o In addition, the consumer buying behavior may also change according to social class. A consumer from the lower class will be more focused on price. While a shopper from the upper class will be more attracted to elements such as quality, innovation, features, or even the “social benefit” that he can obtain from the product.

Cultural trends:

o Cultural trends or “Bandwagon effect” are defined as trends widely followed by people and which are amplified by their mere popularity and by conformity or compliance with social pressure. The more people follow a trend, the more others will want to follow it.

• They affect behavior and shopping habits of consumers and may be related to the release of new products or become a source of innovation for brands.

o By social pressure, desire to conformity or belonging to a group, desire to “follow fashion trends” or simply due to the high visibility provided by media, consumers will be influenced, consciously or unconsciously, by these trends.

o For example, Facebook has become a cultural trend. The social network has widely grew to the point of becoming a must have, especially among young people.

• It is the same with the growth of the tablet market. Tablets such as iPad or Galaxy Tab have become a global cultural trend leading many consumers to buy one. Even if they had never specially felt the need before.

o For a brand, create a new cultural trend from scratch is not easy.Apple did it with the tablets with its iPad. But this is an exception. However, brands must remain attentive to the new trends and “bandwagon effects”. Whether to accompany it (create a page on Facebook) or to take part in the newly created market (create its own tablet).

II. Social factors

o Social factors are among the factors influencing consumer behavior significantly. They fall into three categories: reference groups, family and social roles and status.

• Reference groups and membership groups :• The membership groups of an individual are social groups to which he belongs and 

which will influence him. The membership groups are usually related to its social origin, age, place of residence, work, hobbies, leisure, etc..

o The influence level may vary depending on individuals and groups. But is generally observed common consumption trends among the members of a same group.

• The understanding of the specific features (mindset, values, lifestyle, etc..) of each group allows brands to better target their advertising message.

o More generally, reference groups are defined as those that provide to the individual some points of comparison more or less direct about his behavior, lifestyle, desires or consumer habits. They influence the image that the individual has of himself as well as his behavior. Whether it is a membership group or a non-membership group.

o Because the individual can also be influenced by a group to which he doesn’t belong yet but wishes to be part of. This is called an aspirational group. This group will have a direct influence on the consumer who, wishing to belong to this group and look like its members, will try to buy the same products.

o For example, even if he doesn’t need it yet, a surfing beginner may want to buy “advanced” brands or products used by experienced surfers (aspirational group) in order to get closer to this group. While a teen may want the shoe model or smartphone used by the group of “popular guys” from his high school (aspirational group) in order to be accepted by this group.

• Some brands have understood this very well and communicate, implicitly or not, on the “social benefit” provided by their products.Within a reference group that influence the consumer buying behavior, several roles have

been identified:The initiator: the person who suggests buying a product or serviceThe influencer: the person whose point of view or advice will influence the buying decision. It may be a person outside the group (singer, athlete, actor, etc..) but on which group members rely on.The decision-maker: the person who will choose which product to buy. In general, it’s the consumer but in some cases it may be another person. For example, the “leader” of a soccer supporters’ group (membership group) that will define, for the whole group, which supporter’s scarf buy and bear during the next game.The buyer: the person who will buy the product. Generally, this will be the final consumer.Many brands look to target opinion leaders (initiator or influencer) to spread the use and purchase of their product in a social group. Either through an internal person of the group when it comes to a small social group. Or through a sponsorship or a partnership with a reference leader (celebrity, actor, musician, athlete, etc..) for larger groups.Family:

o The family is maybe the most influencing factor for an individual. It forms an environment of socialization in which an individual will evolve, shape his personality, acquire values. But also develop attitudes and opinions on various subjects such as politics, society, social relations or himself and his desires.

o But also on his consumer habits, his perception of brands and the products he buys.

We all kept, for many of us and for some products and brands, the same buying habits and consumption patterns that the ones we had known in our family.

Perceptions and family habits generally have a strong influence on the consumer buying behavior. People will tend to keep the same as those acquired with their families.

o For example, if you have never drunk Coke during your childhood and your parents have described it as a product “full of sugar and not good for health”. There is far less chance that you are going to buy it when you will grow up that someone who drinks Coke since childhood.

For brands – especially for Fast-Moving Consumer Goods (FMCG) or Consumer Packaged Goods (CPG) – successfully “integrate” the family is both a real challenge and an opportunity to develop a strong consumer loyalty among all the family members.

That’s why it’s important for brands to be seen as a family brand in order to become a consumer habit for parents and children when they will become adults.

Social roles and status:o The position of an individual within his family, his work, his country club, his

group of friends, etc.. – All this can be defined in terms of role and social status.o A social role is a set of attitudes and activities that an individual is supposed to

have and do according to his profession and his position at work, his position in the family, his gender, etc.. – and expectations of the people around him.

o Social status meanwhile reflects the rank and the importance of this role in society or in social groups. Some are more valued than others.

o The social role and status profoundly influences the consumer behavior and his purchasing decisions. Especially for all the “visible” products from other people.

o For example, a consumer may buy a Ferrari or a Porsche for the quality of the car but also for the external signs of social success that this kind of cars represents. Moreover, it is likely that a CEO driving a small car like a Ford Fiesta or a Volkswagen Golf would be taken less seriously by its customers and business partners than if he is driving a german luxury car.

o And this kind of behaviors and influences can be found at every level and for every role and social status.

o Again, many brands have understood it by creating an image associated with their products reflecting an important social role or status.

III. Personal factors:

o Decisions and buying behavior are obviously also influenced by the characteristics of each consumer.

Age and way of life:o A consumer does not buy the same products or services at 20 or 70 years. His

lifestyle, values, environment, activities, hobbies and consumer habits evolve throughout his life.

o For example, during his life, a consumer could change his diet from unhealthy products (fast food, ready meals, etc..) to a healthier diet, during mid-life with family before needing to follow a little later a low cholesterol diet to avoid health problems.

o The factors influencing the buying decision process may also change. For example, the “social value” of a brand generally play a more important role in the decision for a consumer at 25 than at 65 years.

o The family life cycle of the individual will also have an influence on his values, lifestyles and buying behavior depending whether he’s single, in a relationship, in a relationship with kids, etc.. As well as the region of the country and the kind of city where he lives (large city, small town, countryside, etc..).

o For a brand or a retailer, it may be interesting to identify, understand, measure and analyze what are the criteria and personal factors that influence the shopping behavior of their customers in order to adapt.

o For example, it is more than possible that consumers living in New York do not have the same behavior and purchasing habits than the ones in Nebraska. For a retailer, have a deep understanding and adapt to these differences will be a real asset to increase sales.

Purchasing power and revenue:o The purchasing power of an individual will have, of course, a decisive influence

on his behavior and purchasing decisions based on his income and his capital. This obviously affects what he can afford, his perspective on money and the level of

importance of price in his purchasing decisions. But it also plays a role in the kind of retailers where he goes or the kind of brands he buys.

o As for social status, some consumers may also look for the “social value” of products they buy in order to show “external indications” of their incomes and their level of purchasing power..

Lifestyle:The lifestyle of an individual includes all of its activities, interests, values and opinions.

The lifestyle of a consumer will influence on his behavior and purchasing decisions. For example, a consumer with a healthy and balanced lifestyle will prefer to eat organic products and go to specific grocery stores, will do some jogging regularly (and therefore will buy shoes, clothes and specific products), etc..Personality and self-concept:

Personality is the set of traits and specific characteristics of each individual. It is the product of the interaction of psychological and physiological characteristics of the individual and results in constant behaviors.

It materializes into some traits such as confidence, sociability, autonomy, charisma, ambition, openness to others, shyness, curiosity, adaptability, etc..While the self-concept is the image that the individual has – or would like to have – of him and he conveys to his entourage. These two concepts greatly influence the individual in his choices and his way of being in everyday life. And therefore also his shopping behavior and purchasing habits as consumer.

In order to attract more customers, many brands are trying to develop an image and a personality that conveys the traits and values - real or desired – of consumers they are targeting.

For example, since its launch, Apple cultivates an image of innovation, creativity, boldness and singularity which is able to attract consumers who identify to these values and who feel valued – in their self-concept – by buying a product from Apple.

Because consumers do not just buy products based on their needs or for their intrinsic features but they are also looking for products that are consistent and reinforce the image they have of themselves or they would like to have.

The more a product or brand can convey a positive and favorable self-image to the consumer, the more it will be appreciated and regularly purchased.

IV. Psychological factors Among the factors factors influencing consumer behavior, psychological factors can be

divided into 4 categories: motivation, perception, learning as well as beliefs and attitudes. Motivation: Motivation is what will drive consumers to develop a purchasing behavior. It is the

expression of a need is which became pressing enough to lead the consumer to want to satisfy it. It is usually working at a subconscious level and is often difficult to measure.

Motivation is directly related to the need and is expressed in the same type of classification as defined in the stages of the process

To increase sales and encourage consumers to purchase, brands should try to create, make conscious or reinforce a need in the consumer’s mind so that he develops a purchase motivation. He will be much more interested in considering and buy their products.

They must also, according to research, the type of product they sell and the consumers they target, pick out the motivation and the need to which their product respond in order to make them appear as the solution to the consumers’ need.

Perception:Perception is the process through which an individual selects, organizes and interprets the

information he receives in order to do something that makes sense. The perception of a situation at a given time may decide if and how the person will act.

Depending to his experiences, beliefs and personal characteristics, an individual will have a different perception from another.

Each person faces every day tens of thousands of sensory stimuli (visual, auditory, kinesthetic, olfactory and gustatory). It would be impossible for the brain to process all consciously. That is why it focuses only on some of them.

The perception mechanism of an individual is organized around three processes:Selective Attention: The individual focuses only on a few details or stimulus to which he is subjected. The type of information or stimuli to which an individual is more sensitive depends on the person.

For brands and advertisers successfully capture and retain the attention of consumers is increasingly difficult. For example, many users no longer pay any attention, unconsciously, to banner ads on the Internet. This kind of process is called Banner Blindness.The attention level also varies depending on the activity of the individual and the number of other stimuli in the environment. For example, an individual who is bored during a subway trip will be much more attentive to a new ad displayed in the tube. It is a new stimuli that breaks the trip routine for him.

Consumers will also be much more attentive to stimuli related to a need. For example, a consumer who wishes to buy a new car will pay more attention to car manufacturers’ ads. While neglecting those for computers.

Lastly, people are more likely to be attentive to stimuli that are new or out of the ordinary. For example, an innovative advertising or a marketing message (Unique Value Proposition) widely different from its competitors is more likely to be remembered by consumers.Selective Distortion: In many situations, two people are not going to interpret an information or a stimulus in the same way. Each individual will have a different perception based on his

experience, state of mind, beliefs and attitudes. Selective distortion leads people to interpret situations in order to make them consistent with their beliefs and values.For brands, it means that the message they communicate will never be perceived exactly in the same way by consumers. And that everyone may have a different perception of it. That’s why it’s important to regularly ask consumers in order to know their actual brand perception.Selective distortion often benefits to strong and popular brands. Studies have shown that the perception and brand image plays a key role in the way consumers perceived and judged the product.Several experiments have shown that even if we give them the same product, consumers find that the product is or tastes better when they’ve been told that it’s  from a brand they like than when they’ve been told it’s a generic brand. While it is exactly the same product!Similarly, consumers will tend to appreciate even less a product if it comes from a brand for which they have a negative perception.Selective Retention: People do not retain all the information and stimuli they have been exposed to. Selective retention means what the individual will store and retain from a given situation or a particular stimulus. As for selective distortion, individuals tend to memorize information that will fit with their existing beliefs and perceptions.

Unit-III

Dealing with the competiton –competitive forces- identifying competitors- analyzing competitors- designing the competitive intelligence system – designing competitive strategies- balancing customer and competitor orientations.

COMPETITION

DefinitionRivalry in which every seller tries to get what other sellers are seeking at the same time: sales, profit, and market share by offering the best practicable combination of price, quality, and service. Where the market information flows freely, competition plays a regulatoryfunction in balancing demand and supply.

Marketing - Dealing With Competition

Dealing with Competition. To deal with competition, we must first identify who they are, analyze and compare them against ourselves, then strategize ways in handling them.

o There are two frameworks for identifying competitors. We can use the Industry or MARKET frameworks. To use the Industry framework, we ask ourselves, who else differentiates like me? Who has entry and exit barriers like me? Who has vertical integration like me? Who is as global or as local as me? And who has cost structures like me? Notice that “Like me” is a key component to look for.

If we use the MARKET framework, then we simply ask ourselves: Who else can satisfy the same customer need? This opens up the playing field to both direct and very indirect competitors. Pepsi Co’s bottled water division doesn’t just identify CocaCola as their competitor. Tap water is in fact their largest competitor because it is after the same customer need.

Both techniques are valid ways of coming up with competitors, the idea is to make as long a list as possible of direct, and indirect competitors. Then we can move on to the analysis phase.

Now that you have a list of competitors, we want to analyze them. There are three techniques here, using strategy groups, understanding the competitor’s objectives, and understanding their strengths & weaknesses. These techniques guide your research into understanding of your competitors.

The Strategy Group technique allows you to rank competitors on two scales simultaneously. By graphing various attributes on axis, such as quality versus vertical integration, or price versus service, you can bucket your competitors into similar groups. This gives you a framework for viewing the various groups. The idea is to look for patterns and groupings.

Then we look at your competitor’s objectives. Are they after profits? market share? Cash flow? Or do they want to be a technology or service leader in that sector? The important thing here is to get inside their heads. What is motivating them? Knowing their motives makes you more agile in your response. Treating a competitor who is after profits is very different than one who is after market share.

Then you want to gauge your strengths and weaknesses relative to your competitors. How’s your quality perceived? How about the customer experience? Do they know or recognize your brand? And are you too expensive? Or too cheap? You must find this information through research.

Set a survey and ask your customers, your suppliers and distributors. How well does your company perform against your competitors. Understand where you stand against your competitors in share of market, share of mind and share of heart. And finally, figure out the metrics that your best competitors are using to gauge success, and set those metrics up for yourself as benchmarks.

Now that you have studied the competition and how you compare against them, it is time to set a strategy. If your firm wants to be number one on the market there are three ways to do it. By expanding total market, by protecting market share, or by increasing market share.

To expand the total market, or to make the pie bigger, your only options are to attract more customers, or create more usage with the existing customers. You might start adapting your products and advertising towards a new segment of customers. Or you might, like Brita, put a expiry indicator on your product to encourage more frequent replacement, more purchases of your product.

Of course, to stay #1, you don’t want to lose your current market share. You must stay ahead of your competitors to do so. Which means innovate. This means innovation not just in products, but also in services, delivery and product line coverage. You might add higher end and lower end into a product line to capture the flank businesses. You might tighten the logistics to deliver lower cost or faster delivery. When it comes to innovation, look beyond your base product and at the entire package solution.

Finally, you may want to increase your market share to become number 1. But this will come at a cost. To get more of the same existing pie, you must offer a lower cost or more at the same price to steal customers away from your competitors. So you must decide where your optimal profitability vs Market share lies. You certainly don’t want to enter a price war situation, driving down profits for the entire market.

How you pair these three strategies is guided by who you are in the market. There are four groups in every field. Leaders, followers, challengers and nichers. Understand where your company fits is important in choosing what strategy to use.

If you are a leader, you may want to simply protect market share and work to expand the total market. If you are Nokia, you own so much of the market that stealing market share becomes less appealing than expanding the total market.

If you are a follower, then you are after the coat tails of existing giants. Retaining market share and undercutting the leader is your technique. You’re not there first, but you’re cheaper and sometimes better. Cell phone manufacturer HTC started out as a follower.

A challenger is most definitely after the competitor’s pie. They can do this by pecking on their rival’s weaknesses. They can buying out some competitors to expand their customer list and product lines. They can undercut by hosting sales and blitzes. They can even leapfrog by acquiring next generation technologies to out-innovate a competitor.

Finally, a nicher is most interested in peripheral pies. By becoming a specialist, they capture specific customer segments so thoroughly that no one can touch them. Profit margins are high, but volume will remain low. Think of your local favorite family owned restaurant, that’s a location specialist. A customer prototype shop would be both a job-shop and location specialist. Your local bike store might be a service specialist.

No matter who you, who your competitors are or what strategies you undertake, you must remember always, to keep an eye on the competitors, but to focus on customers. No matter the tactics used against your competitors, at the end of the day you are striving to win customers. Therefore, focusing on customers is the only way to truly win.

TEN WAYS TO KEEP AHEAD OF THE COMPETITION

Whenever consumer spending is slowing down, you need to defend your MARKET position and maintain your competitive edge. Tom Whitney shows you how to stay ahead of your rivals

1. Know the competition. Find out who your competitors are, what they are offering and what their unique selling point (USP) is. This will identify the areas you need to compete in, as well as giving you a platform for differentiating yourself.

2. Know your customers. Customer expectations can change dramatically when economic conditions are unstable. Find out what matters to your customers now - is it lower price, more flexible service, the latest products? Revise your sales and MARKETING strategy accordingly.

3. Differentiate. It's essential to give your customers good reasons to come to you rather than a rival. Your USP should tap into what customers want and it should be clear and obvious - no-one should have to ask what makes you different.

4. Step up your MARKETING. Make more effort to tell people who you are, what you sell and why they should buy from you. It doesn't have to be expensive; MARKETING can range from posters in your window and leaflet drops through to advertising campaigns in local media.

5. Update your image. Simple steps such as painting the front of your premises can make your business look more modern and inviting. But look also at business cards, stationery, your website, branded packaging, clothing and so on. Does your image reflect your USP?

6. Look after your existing customers. They will be your competitors' target MARKET. Provide better customer service by being more responsive to their needs and expectations. If feasible, consider offering low-cost extras such as improved credit terms, discounts or loyalty schemes - remember, it's cheaper and easier to keep customers than to find new ones.

7. Target new markets. Selling into a greater number of markets can increase your customer base and spread your risk. Consider whether you can sell online or overseas, for example. Are there groups you've never targeted before who might be interested in your offer? Don't waste time MARKETING to people who won't be interested, however.

8. Expand your offer. What related products or services might your customers be interested in? You might even consider diversifying into another area - many cafes have successfully offered Internet access, for example.

9. Be the best employer. Skilled, motivated staff under pin vibrant, growing businesses. But attracting them means more than paying a competitive wage - people are often more impressed by a good working atmosphere and benefits such as flexible working and structured career development.

Look to the future. Businesses that plan for growth are more successful than those that are happy to stay still. Keep up with developments in your sector, follow consumer trends, INVEST in new technology and - crucially - have a clear idea of where you want to be in one, three and five years' time.

COMPETITIVE FORCES

IDENTIFYING COMPETITORS

In simple terms, your competitors can be identified as those companies that offer similar products or services to the same customers at similar prices. These can be either direct or indirect competitors.

As an example, Kodak identifies Fuji as a major or direct competitor for camera products. However, they also face competition from companies that offer different  products, but ones that supply the same service or capability,

i.e.  indirect competitors which are companies like Nokia who offer mobile phones with digital cameras as an integrated feature.

Identifying who your competitors are and understanding the approach they take in the market can help you to develop and sustain a competitive advantage.

The following questions can assist you in identifying and understanding your competitors: Can you make a list of your top five or ten direct competitors? Can you identify any indirect competitors to your product or service?

Do you know what your competitors are doing, i.e. what are the benefits of their products and how are they marketed?

What are your competitors' strengths and weaknesses? What do consumers think about your competitors' products? How are you going to position yourself in comparison to your competitors? Would it be

meeting the competition? beating the competition? countering the competition? Are you competing on price, product, quality or another point of difference?

When analysing competitors it is important to identify their mix of objectives and the importance of each.

For example, some competitors may be focused purely on profits while others may be focused on customer service. Understanding the relative importance the competitor places on profitability, growth, market share, technology etc can assist you in understanding how your competitors may react in different competitive situations.

IDENTIFYING AND ANALYSING COMPETITORS

Introduction

In this competitive world there is no business that operates in isolation, there are many businesses that are marketing products similar to or substitute of products you are marketing. These organisations are your rivals and you have to compete with your rivals. Business competition is the rivalry of two or more businesses that target the same customers, for example Coca-Cola and Pepsi, or McDonald's and Burger King. Business organisations to be successful in long run have to identify their competitors and analyse their strengths and weaknesses to defeat them.

MeaningofCompetitorCompetitor is a person or an organisation against whom other person or organisation is competing. In business, competitor is a business organisation or a company operating in the same industry or a similar industry which offers a similar product or service. For example - Wal-Mart and Target are big players in Retail chain industry, they both are competitor of each other.

The presence of competitors in an industry means consumers have more alternatives to choose from, it forces competitors to reduce prices of their products or services to grab the maximum shareinthe MARKET.

IdentifyingCompetitorsIn the process of developing a successful marketing strategy, the first step is to identify the key competitors in your MARKET. Competitor identification is important to increase managerial awareness of competitive threats and opportunities. Identification of key competitors is necessary to gain competitive advantage by offering your customers a greater value than the competitors. Not only current competitors are required to be identified, but future competitors are also to be anticipated.

According to Ferrell, Hartline, Lucas, and Luck, 1998, there are different varieties of competitors :-

Brand Competitors - Such type of competitors are those who market exactly similar products, at similar price, and also to the same customers. For example, Pepsi and Coca-Cola. Product Competitors - Such type of competitors are those who market similar products, but with different features and benefits, and at different prices. For example, Pepsi and Maaza (fruit drink). Generic Competitors - Such type of competitors are those who market different products, but provide the same utility or benefit. For example, Audio cassettes and CDs, or Pepsi and Water Total Budget Competitors - Such type of competitors are those who market different products, but competing for the same FINANCIAL resources of the customers. For example, Pepsi and Potato-chips.

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AnalysingCompetitors

Competitor analysis helps an organisation to identify opportunities for and threats to the organisation from the competitive industrial environment. Competitor analysis is an assessment of the strengths and weaknesses of current and potential competitors. It is an essential component of corporate strategy; while formulating organisation's strategy, managers must consider the

competitor organisations' strategies.

Competitor Analysis can be defined as the analysis of data and information about competitors to generate intelligence that is useful in strategic decision making.

DESIGNING THE COMPETITIVE INTELLIGENCE SYSTEM

Competitive intelligence is the action of defining, gathering, analyzing, and distributing intelligence about products, customers, competitors, and any aspect of the environment needed to support executives and managers making strategic decisions for an organization.

Competitive intelligence essentially means understanding and learning what's happening in the world outside your business so you can be as competitive as possible. It means learning as much as possible—as soon as possible—about your industry in general, your competitors, or even your county's particular zoning rules. In short, it empowers you to anticipate and face challenges head on.Key points of this definition:

Competitive intelligence is an ethical and legal business practice, as opposed to industrial espionage, which is illegal.The focus is on the external business environment

There is a process involved in gathering information, converting it into intelligence and then utilizing this in business decision making. Some CI professionals erroneously emphasize that if the intelligence gathered is not usable, or actionable, then it is not intelligence.

A more focused definition of CI regards it as the organizational function responsible for the early identification of risks and opportunities in the market before they become obvious. Experts also call this process the early signal analysis. This definition focuses attention on the difference between dissemination of widely available factual information (such as market statistics, financial reports, newspaper clippings) performed by functions such as libraries and information centers, and competitive intelligence which is a perspective on developments and events aimed at yielding a competitive edge.

The term CI is often viewed as synonymous with competitor analysis, but competitive intelligence is more than analyzing competitors—it is about making the organization more competitive relative to its entire environment and stakeholders: customers, competitors, distributors, technologies, and macroeconomic data.

The actual importance of these categories of information to an organization depends on the contestability of its markets, the organizational culture, the personality and biases of its top decision makers, and the reporting structure of competitive intelligence within the company.

Strategic Intelligence (SI)

It focuses on the longer term, looking at issues affecting a company's competitiveness over the course of a couple of years. The actual time horizon for SI ultimately depends on the industry and how quickly it's changing. The general questions that SI answers are, ‘Where should we as a company be in X years?' and 'What are the strategic risks and opportunities facing us?' This type of intelligence work involves among others the identification of weak signals and application of methodology and process called Strategic Early Warning (SEW), first introduced by Gilad, followed by Steven Shaker and Victor Richardson, Alessandro Comai and Joaquin

Tena, and others. According to Gilad, 20% of the work of competitive intelligence practitioners should be dedicated to strategic early identification of weak signals within a SEW framework.

Tactical Intelligence:

The focus is on providing information designed to improve shorter-term decisions, most often related with the intent of growing market share or revenues. Generally, it is the type of information that you would need to support the sales process in an organization. It investigates various aspects of a product/product line marketing:Product – what are people selling?Price – what price are they charging?Promotion – what activities are they conducting for promoting this product?Place – where are they selling this product?Other – sales force structure, clinical trial design, technical issues, etc.

With the right amount of information, organizations can avoid unpleasant surprises by anticipating competitors' moves and decreasing response time.

Examples of competitive intelligence research is evident in daily newspapers, such as the Wall Street Journal, Business Week, and Fortune. Major airlines change hundreds of fares daily in response to competitors' tactics. They use information to plan their own marketing, pricing, and production strategies.

Resources, such as the Internet, have made gathering information on competitors easy. With a click of a button, analysts can discover future trends and market requirements. However competitive intelligence is much more than this, as the ultimate aim is to lead to competitive advantage. As the Internet is mostly public domain material, information gathered is less likely to result in insights that will be unique to the company. In fact there is a risk that information gathered from the Internet will be misinformation and mislead users, so competitive intelligence researchers are often wary of using such information.

As a result, although the Internet is viewed as a key source, most CI professionals should spend their time and budget gathering intelligence using primary research—networking with industry experts, from trade shows and conferences, from their own customers and suppliers, and so on. Where the Internet is used, it is to gather sources for primary research as well as information on what the company says about itself and its online presence (in the form of links to other companies, its strategy regarding search engines and online advertising, mentions in discussion forums and on blogs, etc.).

Also, important are online subscription databases and news aggregation sources which have simplified the secondary source collection process. Social media sources are also becoming important—providing potential interviewee names, as well as opinions and attitudes, and sometimes breaking news (e.g., via Twitter).

Organizations must be careful not to spend too much time and effort on old competitors without realizing the existence of any new competitors. Knowing more about your competitors will allow your business to grow and succeed. The practice of competitive intelligence is growing every year, and most companies and business students now realize the importance of knowing their competitors.

DESIGNING COMPETITIVE STRATEGIES

Strategic design is the application of future-oriented design principles in order to increase an organization’s innovative and competitive qualities. "Traditional definitions of design often focus on creating discrete solutions—be it a product, a building, or a service. Strategic design is about applying some of the principles of traditional design to "big picture" systemic challenges like health care, education, and climate change. It redefines how problems are approached, identifies opportunities for action, and helps deliver more complete and resilient solutions." 

Its foundations lie in the analysis of external and internal trends and data, which enables design decisions to be made on the basis of facts rather than aesthetics or intuition. As such it is regarded as an effective way to bridge innovation, research, management and design.The discipline is mostly practiced by design agencies or by internal development departments. Businesses are the main consumers of strategic design, but the public, political and not-for-profit sectors are also making increasing use of the discipline.

Its applications are varied, yet often aim to strengthen one of the following: product branding, product development,corporate identity, corporate branding and service delivery.

Strategic design has become increasingly crucial in recent years, as businesses and organisations compete for a share of today’s global and fast-paced marketplace.

“To survive in today’s rapidly changing world, products and services must not only anticipate change, but drive it. Businesses that don’t will lose market share to those that do. There have been many examples of strategic design breakthroughs over the years and in an increasingly competitive global market with rapid product cycles, strategic design is becoming more important.”

Today's business environment calls for a leader who not only has sound analytical and business skills but is also able to think intuitively and look for creative solutions to business problems.

Globally and nationally there are a plethora of management programs that have created an army of learners who are strongly left brain oriented but tend to be undeveloped in the right brain hemisphere which works on synthesising information through intuitive thinking. The increasingly globalised business world needs leaders who are able to view the workplace holistically and develop an ability to ‘connect the dots’ in an effective and coherent manner.

The current thinking in the management pedagogy has produced straight-jacketed managers who miss the view of the larger picture leading to leadership rigidity and absence of strategic thinking; hence stifling creativity; the foundation for the continued success and growth of business. The concept of design and design thinking has seen an upward surge in India due to the resurgent growth of design and a demand for students and professionals who can apply design thinking for both career development and exploring entrepreneurial opportunities.

BALANCING CUSTOMER SERVICE AND SATISFACTIONTrimming customer service costs while boosting customer satisfaction — and hence

loyalty — is challenging in the best of times. During a downturn, performing this balancing act becomes both more difficult and more critical to achieve.

Many companies don’t even try. They respond to straitened economic circumstances by cutting service costs and sacrificing service quality in a quest to hit short-term financial targets.

When the economy starts recovering, they beef up INVESTMENTS in customer service to win back customers. And they find it’s too late.

Look at what happened to a U.S. technology company we’ll call ABC-Tek when it became one of the first to move tech support to India. Off shoring this service cut costs, but at the price of customer loyalty.

ABC-Tek’s off shoring strategy wasn’t a bad one. But in executing it, the company focused too much on costs and too little on managing the customer experience. Ramping up agent capabilities and productivity took longer than expected, leading to long hold times and low resolution rates. The company saw its customer satisfaction scores plummet — as well as its sales. To recover, the company had to make a large INVESTMENT  in improving the customer experience, from reopening U.S. call centers to significantly increasing its number of agents.

The mistakes were costly, but ABC-Tek learned from them. Its service operations are now world class. The company differentiates service delivery based on customer value and customer needs. It created a premium product queue in the U.S. while continuing to use offshore or outsourced call centers for its lowest-priced products. ABC-Tek has tied service delivery into the core value proposition for its products, in effect allowing customers to select service levels while also enabling the company to align service costs with customer value and margins.

Attaining service efficiency and customer satisfactionManagers often view service efficiency and customer satisfaction as incompatible goals. But they don’t have to be. By maintaining customer service during a slowdown, companies with a strong core of loyal customers position themselves for growth and gain a competitive edge.Our research shows that companies with superior service operations have higher customer loyalty scores, which correlates with sustained growth. How do they do it? They INVEST  in learning about customer needs and then translate those insights into innovations that continuously improve services. They decide what to focus on, they measure it, and they create business processes to manage those metrics over time.

Leaders of Australian telecommunications company Telstra knew that their customers highly value field technicians who show up when they say they will and fix the problem at the first visit. So the company INVESTED in an incentive system for field workers that promotes both quality and productivity. New communication tools tell each technician the number of productivity points they earn in a particular day. Points are deducted, however, if there are quality issues. Other program features, such as automated scheduling, have also boosted efficiency.

Telstra’s results are impressive. Output per employee rose 50% above the company’s benchmark, while revisits within seven days dropped 23%.

Three practices that strike an optimal balanceFrom our work with clients, we’ve identified three practices that help companies balance efficiency and quality in their service operations:

1. Segment service levels.

When electronics retailer Best Buy decided to emphasize service and make it a key part of its products’ value proposition, the company retrained store employees so they could recognize and better serve different customer segments. In stores that skewed toward upscale suburban customers, staff were hired and trained to serve this customer base in ways that are subtly

different from the service approach used in stores that drew younger, more urban customers. Staffing was increased during peak shopping hours so that higher-value customers could receive focused assistance.

Best Buy’s decision to differentiate service levels and match them to different customer segments has paid off, boosting store sales while keeping a lid on costs. By judiciously reducing staffing during off-peak times, Best Buy can afford to beef up employee hours during the busiest periods. To serve customers faster and with more flexibility, the company equipped employees with two-way radios to improve communication across the large Best Buy selling floors.Because of its detailed knowledge of the buying habits of its different customer segments, Best Buy is able to customize store formats and product mixes to grow sales. For example, the newest Best Buy stores devote more space to growing categories like home appliances and mobile communications and less space for shrinking categories like CDs and DVDs. These new stores offer specially trained staff and service levels matching the product mix.

All these actions have gained Best Buy higher customer satisfaction ratings — and higher sales. The company constantly measures the cost of delivering different service levels against the value provided by the corresponding customer segment — and just as constantly searches for ways to reduce inefficiencies.

2. Strive for consistency over several budget cycles.

After FedEx completed a number of strategic acquisitions beginning in the 1990s to diversify and expand its portfolio, the company institutionalized what it calls “The Purple Promise” — a pledge to put the customer first on every interaction. This unifying theme promises the same high-quality service from all companies in the FedEx family, whether they offer air, ground, or freight delivery, or office business solutions.

To ensure consistent levels of service across its subsidiary companies, FedEx established FedEx Services to give customers access to the full range of FedEx transportation, supply chain, e-commerce, business, and related information services. By integrating sales, MARKETING, information technology, pricing, and customer service support for the global FedEx brand, FedEx Services has been able to better coordinate its revenue and yield management programs across the enterprise. The strategy of centralizing customer-service functions has helped FedEx attain and maintain customer loyalty scores that are among the highest in the industry.

FedEx manages customer service over a multiyear time horizon and sets continuous improvement goals. A strategy and planning group focused on customer service looks a few years out to determine what the customer experience should be, how operations should be structured, what new technology can be leveraged, and how core processes can be improved to reduce inefficiency and cut costs.

3. Share accountability and continually look for efficiencies.

At Telstra, field technicians aren’t the only employees whose bonuses are affected by the company’s track record in getting customers serviced on time — and their issues resolved in one visit. Field performance and field quality are among the metrics used for calculating bonuses for executives as high up in the organization as one level below the CEO.

When a leading insurance company that we’ll call InsureCo attempted to drive down costs per call by using automation to answer more calls, it actually found its costs going up, not down. The culprit? A lack of accountability.

The company invested heavily in a broad portfolio of technology initiatives across its six customer service call centers, with the aim of using fewer agents for claims processing. When, despite these INVESTMENTS, InsureCo found its costs per call actually rising, the company brought in a new VP of customer service to turn the situation around.

An analysis of the existing call center plan found that nearly 100% of the cost targets were dependent on technology upgrades and improvements, yet no one in IT nor any managers in the customer service organization were accountable for realizing results from the IT INVESTMENTS. What InsureCo needed was good old-fashioned management oversight and process reviews.

InsureCo overhauled its call center plan based primarily on a set of non-IT-dependent initiatives to immediately reduce costs per call. For example, company leaders found that the company was significantly overdelivering against its service-level objectives. In many instances, 85% – 90% of all calls were answered in 30 seconds, significantly faster than InsureCo’s targeted service level of 80%. So the company increased its call response time to match its service level target, thereby saving on labor costs. The company made a smart trade-off here. Its move didn’t improve customer service but neither did it significantly diminish it, and the company saw no effect in its customer satisfaction scores.

Another efficiency InsureCo realized came from adopting a staggered schedule for its workforce. By using part-time workers to meet fluctuating workload demands, the company shaved off some labor costs.

The company also discovered that it was not taking full advantage of its new call-routing technology. Each of the six call centers was run like a separate business, with staffing based on call demand. But the technology allowed InsureCo to reduce staffing costs by pooling resources. Instead of six separate queues for incoming calls, it created one. Callers were routed to the next available operator at any of the centers.

The company then supplemented these moves with a focused set of IT-dependent cost-saving initiatives. Among them: An enhanced self-service claim-processing Web site and a renewed effort to drive calls to InsureCo’s interactive voice response system. Finally, for both IT and non-IT initiatives, clear accountability for meeting performance targets was established within the customer service organization.

The results from InsureCo’s efforts to share accountability and reduce inefficiencies were dramatic: the company cut costs by 15% while handling 15% more calls, which translated into $35 million annually in cost savings.

COMPETITIVE ORIENTATION

Meaning Which aspects of business a firm is focused on depends on its MARKET position and

relative exposure to its industry and to the public. A small, local retail firm is likely to be more focused on customer service than on competition, because if it serves its customers well it will do well, whatever its relation to other businesses in the field. Competitively oriented firms, on the other hand, base their business strategy on their competition.

Competitive Orientation

When a business is competitively oriented, it constant reassesses its strengths and weaknesses relative to its competitors. A performance evaluation may include production efficiency, pricing, delivery times, customer satisfaction, innovation, employee retention and MARKET share. In a competitive economic system, each economic entity is attempting to maximize advantages for itself at the expense of its competitors. For companies that deal entirely with other businesses, for example wholesalers or sellers of raw materials, analysis of competition is more important than marketing or public profile.Customer Orientation

Customer-oriented business is engaged in by firms that sell products and services to the general public and need to maintain a positive, high-profile public image. For retail firms, competition is a serious issue, but it can be engaged in by focusing on the customer rather than on the competition itself. When two competing firms both attempt to lure in customers through low prices, high quality and good service, they are competing with each other, but through the medium of the customer. This is a different form of competitive orientation than that engaged in by wholesalers and producers of raw materials.

Market Positioning

Competitive orientation requires an organization to identify the optimum MARKET position and strive to take a larger portion of it than the competition. Companies all attempt to acquire prime retail space and advertising venues, develop the most tenacious and compelling brands and images and capture as much public loyalty as possible. Much of this jockeying for position is not the result of voluntarily focusing on competition; any corporation would love to be the only player in the field. When multiple players attempt to access the same advantages, competition between them develops spontaneously and can't be avoided.

UNIT – 4

Developing new market offering- challenges in new product development – managing the development process- concept to strategy- development to commercialization- the consumer adaptation process. Setting the product and branding strategy – the product and the product mix- product line decisions- brand decisions- packaging and labeling.

HOW TO DEVELOP NEW PRODUCTS

Generate ideas for new and modified products: for example, from customer feedback, employee suggestions and technical developments.

Assess how these ideas fit with your strategy, market position and skills; confirm that you have the resources to devote to development.

Research the market, assessing customer requirements and sales potential; identify key risks and plan your marketing strategy.

Research the competition and potential competition; learn from competitors’ successes and failures.

Form a project team covering all the key skills (eg marketing, design, production, purchasing and finance) and led by a product champion.

Plan the critical path, identifying which activities must be undertaken first and which can happen in parallel.

Set budgets, objectives and timescales; regularly assess progress during the product development project and, if necessary, modify plans.

Assess other risks to the project such as technical hurdles and whether your intellectual property can be protected.

Define the basic product specification and translate specific features into product requirements; identify your key selling points.

Estimate the likely selling price and set target production costs; assess likely actual costs of development and production, allowing for contingencies.

Design the product, taking into account marketing, production and purchasing requirements.

Develop a prototype : iron out technical and production issues and to test market reaction; make any necessary changes.

Gear up for full-scale production and launch the product. Continue to monitor the product's success and look for opportunities to further develop

it.DEVELOPING NEW MARKET OFFERING

Developing new market offering:-

Six categories of new products

1. New-to-the-world products2. New product lines3. Additions to existing product lines4. Improvements and revisions of existing products5. Repositioning6. Cost reductions

Challenges in New-Product DevelopmentNew-Product Failure• Shortage of important ideas in certain areas• Fragmented markets• Social and governmental constraints• Cost of development• Capital shortages• Faster required development time• Shorter product life cycles

Organizational Arrangements

New-product deployment requires specific criteria

• The product can be introduced within five years• The product has a market potential of at least $50 million and a 15 percent growth rate.• The product would provide at least 30 percent return on sales and 40 percent on investment.• The product would achieve technical or market leadership.

Organizational Arrangements

Organizing New-Product Development• Product managers• New-product managers• High-level management committee • New product department• Venture teams

Managing the Development Process: Ideas

Idea GenerationInteracting with OthersSales representatives– Intermediaries– Product champion Techniques for stimulating creativity in individuals and groups Attribute listing– Forced relationships– Morphological analysis– Reverse assumption analysis– New contexts– Mind-mapping

Managing the Development Process: Ideas

Idea ScreeningTwo types of errors in screening ideas– DROP-error– GO-error• Absolute product failure• Partial product failure• Relative product failure

Concept to Strategy

Concept Development and Testing– Product idea– Product concept Concept development– Category concept– Product-positioning map– Brand concept• Concept Testing– Rapid prototyping– Virtual reality– Customer-driven engineering

Managing the Development Process: Concept to StrategyConcept Development and TestingQuestions to measure product dimensions– Communicability and believability– Need level– Gap level– Perceived value– Purchase intention– User targets, purchase occasions, purchasing frequency

Conjoint AnalysisExample: five design elements• Three package designs• Three brand names• Three prices• Possible Good Housekeeping seal• Possible money-back guaranteeMarketing Strategy• Business Analysis– Estimating Total Sales• Survival-age distribution– Estimating Cost and Profits

• Break-even analysis• Risk analysis

Managing the Development Process: Concept to StrategyMarketing Strategy• Business Analysis– Estimating Total Sales• Survival-age distribution– Estimating Cost and Profits• Break-even analysis• Risk analysis

Managing the Development Process: Development to Commercialization

Product Development Quality Function Deployment (QFD)• Customer attributes (CAs)• Engineering attributes (EAs)• Customer tests• Alpha testing• Beta testing

Consumer preference measures– Rank-order– Paired-comparison – Monadic-ratingManaging The Development Process: Development to CommercializationMarket Testing• Consumer-Goods Market Testing– Seeks to estimate four variables• Trial• First repeat• Adoption• Purchase frequency– Sales wave research– Simulated Test Marketing– Controlled Test Marketing– Test Markets• How many test cities?• Which cities?• Length of test?• What information?• What action to take?• Business-Goods Market Testing

Managing the Development Process: Development to CommercializationCommercialization• When (Timing)1. First entry2. Parallel entry3. Late entry• Where (Geographic Strategy)• To Whom (Target-Market Prospects)• How (Introductory Market Strategy)– Critical path scheduling (CPS)• Adoption– Consumer-adoption process– Consumer-loyalty process– Mass-market approach– Heavy-usage target marketingManaging the Development Process: Development to CommercializationStages in the Adoption Process• Adopters of new products move through five stages– Awareness– Interest– Evaluation– Trial– AdoptionManaging the Development Process: Development to CommercializationFactors Influencing the Adoption Process• Readiness to Try New Products and Personal Influence– Personal Influence• Characteristics of the Innovation– Relative advantage– Compatibility– Complexity– Divisibility– Communicability• Organizations’ Readiness to Adopt Innovations

CONSUMER ADOPTION PROCESS IN MARKETING0

Adoption is an individual’s decision to become a regular user of a product.Sequence of events beginning with consumer awareness of a new product leading to trial

usage and culminating in full and regular use of the new product. Over time the adoption process resembles a bell curve formed by innovators, early adopters, the majority of consumers, late adopters, and laggards.  An innovation is any good, service, or idea that is perceived by someone as new. The idea may have a long history, but it is an innovation to the person who sees it as new. Innovations take time to spread through the social system. Rogers defines the innovation

diffusion process as “the spread of a new idea from its source of invention or creation to its ultimate users or adopters.”

The consumer-adoption process focuses on the mental process through which an individual passes from first hearing about an innovation to final adoption. Adopters of new products have been observed to move through five stages:

1. Awareness -The consumer becomes aware of the innovation but lacks information about it.

2. Interest-The consumer is stimulated to seek information about the innovation.3. Evaluation -The consumer considers whether to try the innovation.4. Trial-The consumer tries the innovation to improve his or her estimate of its value.5. Adoption -The consumer decides to make full and regular use of the innovation.The new-product MARKETER should facilitate movement through these stages. A

portable electricdishwasher manufacturer might discover that many consumers are stuck in the interest stage;they do not buy because of their uncertainty and the large investment cost. But these same consumers would be willing to use an electric dishwasher on a trial basis for a small monthly fee.The manufacturer should consider offering a trial-use plan with option to buy.

FACTORS INFLUENCING THE ADOPTION PROCESSAs said earlier, there is always resistance to change. WE ALL WANT CHANGE BUT

WE DON’T LIKE IT EVEN WHEN THE CHANGE IS FOR THE BETTERMENTPEOPLE DIFFER IN READINESS TO TRY NEW PRODUCTS

People differ in their approach towards change. Some differ in adopting new fashion, some in adopting new appliances, some doctors are hesitant to apply new medicines and still some farmers do not apply new implements. This is called adoption culture. After the early adoption, they increase the use and then others follow. Others are late adopters by nature. Let us categorize these customers into three units? One who are early adopters. They are very quick in their response. These people are venture some and willing to try new ideas. In fact they are innovators in life and early adopters.? Secondly Early Majority. They are very careful people and take time to adopt things. They tend to collect information about the change or the product, study carefully and then adopt on the basis of their merits.? The third ones are late majority and traditionalists. They are the ones who adopt late and then use the product.CHARACTERISTICS OF THE INNOVATION AFFECTS THE RATE OF ADOPTION

Some products are quick in innovation, such as fashion items or the ones that bring a direct change in our status etc. Some product take long to adoption. Such as technical products or automobiles etc.

The following things are considered1 Relative advantage2 Compatibility3 Complexity4 Divisibility

Other things, which influence adoption, are: social acceptability, scientific acceptability, cost and certainty

SETTING THE PRODUCT AND BRANDING STRATEGY

1. What is a Product?A product- anything that can be offered to a MARKET to satisfy a want or need- including physical goods, services, experiences, events, persons, places, properties, organizations, information, and ideas.

2. Components of the MARKET OfferingValue-based pricesAttractiveness of the MARKETofferingProduct features and qualityServices mix and quality

3. Product Classification SchemesDurabilityTangibilityUse

4. Durability and TangibilityNondurablegoodsServicesDurablegoods

5. Product DifferentiationProduct formFeaturesCustomizationPerformanceConformanceDurabilityReliabilityRepairabilityStyle

6. Consumer Goods ClassificationConvenienceShoppingSpecialtyUnsought

7. Service DifferentiationOrdering ease

DeliveryInstallationCustomer trainingCustomer consultingMaintenance and repairReturns

8. Design DifferentiationIs the totality of features that affect how a product looks , feels and functions, in terms of customer requirements. 

9. Maintenance and RepairDescribes the service program for helping customers keep purchased in good working order

10. Product Systems and MixesProduct systemProduct mixProduct assortmentDepthLengthWidthConsistency

11. Product-Mix Width and Product-Line Length, Depth and Consistency for Proctor& GambleProducts

12. What is the Packaging ?-sometimes called the fifth P, is all the activities of designing and producing the container for a product.

13. Factors Contributing to the Emphasis on PackagingSelf-serviceConsumer affluenceCompany/brand imageInnovation opportunity

14. Packaging ObjectivesIdentify the brandConvey descriptive and persuasive informationFacilitate product transportation and protectionAssist at-home storageAid product consumption

15. Functions of LabelsIdentifiesGradesDescribesPromotes

16. Warranties and Guarantees- are formal statements of expected product performance by the manufacturer

BRAND STRATEGY

Definition

Long-term marketing support for a brand, based on the definition of the characteristics of the target consumers. It includes understanding of their preferences, and expectations from the brand.

Brand is the "name, term, design, symbol, or any other feature that identifies one seller's product distinct from those of other sellers."[1] Brands are used in business, marketing, and advertising. Initially, livestock branding was adopted to differentiate one person's cattle from another's by means of a distinctive symbol burned into the animal's skin with a hotbranding iron. A modern example of a brand is Coca-Cola which belongs to the Coca-Cola Company.

In accounting, a brand defined as an intangible asset is often the most valuable asset on a corporation's balance sheet. Brand owners manage their brands carefully to create shareholder value, and brand valuation is an important management technique that ascribes a money value to a brand, and allows marketing investment to be managed (e.g.: prioritized across a portfolio of brands) to maximize shareholder value. Although only acquired brands appear on a company's balance sheet, the notion of putting a value on a brand forces marketing leaders to be focused on long term stewardship of the brand and managing for value.

The word "brand" is often used as a metonym referring to the company that is strongly identified with a brand.

Marque or make are often used to denote a brand of motor vehicle, which may be distinguished from a car model. A concept brand is a brand that is associated with an abstract concept, like breast cancer awareness or environmentalism, rather than a specific product, service, or business. A commodity brand is a brand associated with a commodity.A logo often represents a specific brand.

THE PRODUCT AND THE PRODUCT MIX

product mix  Definition

A range of associated products that yields larger sales revenue when marketed together than if they were marketed individually or in isolation from others.

PRODUCT MIX, PRODUCT LINES AND PRODUCT STRETCHING

IntroductionBusinesses are continuously making critical decisions about their product range. Product decisions will include whether to develop new productsand how to manage existing products.

This article is about the different ways firms manage the type and number of products they sell and related terms.

Product Mix (Product Portfolio or Product Assortment)The Product mix is the total variety of products a firm sells. Some firms will sell just one product, whilst others will sell a large number of different products. For example Samsung's product mix includes mobile phones, netbooks, tablets, televisions, fridges, microwaves, printers and memory cards. Firms should select their product mix carefully as they will need to generate a profit from each of the products in the product mix.

Product LineFirms may decide to split their product mix into groups known as product lines. A product line is a number of products grouped together based on similar characteristics. The characteristic used to split products, will depend on the firm and its product strategy. They include product price, product quality, who the product is aimed at (target group), and product specification/features. For example Samsung's mobile phones are divided into product lines based on the following features; touch screens, slider/folders, QWERTY keyboards and bar phones. Product lines help firms manage their products as product strategy can be designed around product lines. This is useful if the firm has a large product mix as there is less need to concentrate on individual product type strategy.

Product Line LengthThe product line length shows the number of different products in a product line. A long product line has lots of different products in it and a short product line has a small number of different products. The product manager's job is to work out how many products to include in the product line. If there are too many product types in a product line, they will begin to compete with each other, increase costs unnecessarily and even confuse customers. If the product line is too short it will limit customer choice and send customers to competitors with a greater selection of products.

Product Line DepthSome of the product types in a product line may be split again into groups, the product line depth shows how many subgroups the product line contains. For example Samsung have split their mobile phones into the following product lines touch screens, slider/folders, QWERTY keyboards and bar phones. Each of these product lines can be further split into subgroups at the time of writing this article Samsung had 7 slider mobile phones and 32 touch screen mobile phones, 32 is a deep product line.

Product Line StretchingProduct line stretching occurs when a business adds new product to the product line and the new product types are of a higher or lower quality than existing products in the product line. If the new product types are cheaper or of a lower quality it is known as a downward stretch. If the new product types are more expensive or of a higher quality it is known as an upward stretch. Supermarkets often stretch product lines by offering value, standard and premium versions of their own brand products. Product stretching enables firms to fill any Gaps they have identified in the MARKET.

Product Mix WidthThe product mix width is the number of product lines in the product mix. A wide product mix increases the type of customers a firm can target. However it may involve a lot of work as each product line will require a strategy and management. It could also reduce specialisation as it is difficult to offer every variant of a product type if you are selling lots of different types of product. A narrow product mix may be easier to manage and allow the firm to specialise in particular product lines and product types. However a small product mix reduces the type of customers a firm can target as they can't cater for everyone's product "needs and wants".

ConclusionProduct selection is an important decision as the product is the item you are selling. Firms need to strike a balance between giving customers choice and trying to cater for everybody by STOCKING too many products. Dividing products into product lines and the product line into further groups, helps firms to develop product strategies. It will also help them identify which product ranges sell well and which do not as each product line will be monitored.

BRAND DECISIONS

The importance of branding in positioning a small business cannot be over emphasized by marketers (individuals and organizations) seeking to promote it products by creating product distinctions, differentiation and identification in the target market.

 Branding

Branding is a process through which marketers seeks to position and promote it product in the target market, by creating product distinctions, differentiation and identification.Branding means the use of a name and or mark which are distinctive on a product in order to differentiate it from similar competitor’s product offerings in the target market.Branding is simple – creating distinction and differentiating yours from competitors in the target market.

In a monopolistic market – where competition is been the battle (strive) for brand loyalty, greater market share, sustainability, and appropriate  returns on INVESTMEN, the chances for your business survivor depends largely on the degree to which your brand is identifiable and achieve loyalty in the market. Hence, the need for effectivebranding decision becomes paramount, an urgent decision that requires an intensive analysis on the reasons for your business existence in totality.

EFFECTIVE DECISIONS IN BRANDING

The effective decisions in branding are the decision relating to the following terms in branding.

1.      Your Brand name2.      Your Brand mark

3.      Your TRADE name4.      Your TRADE mark

Sounds so simple? Yes, but as simple as it seem, it goes a long way to determine the rejection and acceptability of your product be it goods and or services, and the possible chances of your business survivor in your target market.

As a marketer, you need to take decision and develop  suitable and effective Brand for your organization.

PACKAGING AND LABELLING

Packaging is the technology of enclosing or protecting products for distribution, storage, sale, and use. Packaging also refers to the process of design, evaluation, and production of packages. Packaging can be described as a coordinated system of preparing goods for transport, warehousing, logistics, sale, and end use. Packaging contains, protects, preserves, transports, informs, and sells. In many countries it is fully integrated into government, business, institutional, industrial, and personal use.

Package labeling (American English) or labelling (British English) is any written, electronic, or graphic communication on the package or on a separate but associated label.

The purposes of packaging and package labels

Packaging and package labeling have several objectives

Physical protection – The objects enclosed in the package may require protection from, among other things, mechanical shock, vibration, electrostatic discharge, compression, temperature,etc.

Barrier protection – A barrier from oxygen, water vapor, dust, etc., is often required. Permeation is a critical factor in design. Some packages contain desiccants or oxygen absorbers to help extend shelf life. Modified atmospheres or controlled atmospheres are also maintained in some food packages. Keeping the contents clean, fresh, sterile and safe for the intended shelf life is a primary function. A barrier is also implemented in cases where segregation of two materials, prior to end use is required, as in case of special paints, glues, medical fluids etc. At consumer end, the packaging barrier is broken or measured amounts of material removed for mixing and subsequent end use.

Containment or agglomeration – Small objects are typically grouped together in one package for reasons of efficiency. For example, a single box of 1000 pencils requires less physical handling than 1000 single pencils. Liquids, powders, and granular materials need containment.

Information transmission – Packages and labels communicate how to use, transport, recycle, or dispose of the package or product.

With pharmaceuticals, food, medical, and chemical products, some types of information arerequired by governments. Some packages and labels also are used for track and trace purposes. Most items include their serial and lot numbers on the packaging, and in the case of food products, medicine, and some chemicals the packaging often contains an expiry/best-before date, usually in a shorthand form. Packages may indicate their material with a symbol.

Marketing – The packaging and labels can be used by marketers to encourage potential buyers to purchase the product. Package graphic design and physical design have been important and constantly evolving phenomenon for several decades. Marketing communications and graphic design are applied to the surface of the package and (in many cases) the point of sale display. Most packaging is designed to reflect the brand's message and identity.

Security – Packaging can play an important role in reducing the security risks of shipment. Packages can be made with improved tamper resistance to deter tampering and also can have tamper-evident[24] features to help indicate tampering. Packages can be engineered to help reduce the risks of package pilferage or the theft and resale of products: Some package constructions are more resistant to pilferage and some have pilfer indicating seals. Counterfeit consumer goods, unauthorized sales (diversion), material substitution and tampering can all be prevented with these anti-counterfeiting technologies. Packages may include authentication seals and use security printing to help indicate that the package and contents are not counterfeit.

Packages also can include anti-theft devices, such as dye-packs, RFID tags, or electronic article surveillance tags that can be activated or detected by devices at exit points and require specialized tools to deactivate. Using packaging in this way is a means of loss prevention.

Convenience – Packages can have features that add convenience in distribution, handling, stacking, display, sale, opening, reclosing, use, dispensing, reuse, recycling, and ease of disposal

Portion control – Single serving or single dosage packaging has a precise amount of contents to control usage. Bulk commodities (such as salt) can be divided into packages that are a more suitable size for individual households. It also aids the control of inventory: selling sealed one-liter-bottles of milk, rather than having people bring their own bottles to fill themselves.

Symbols used on packages and label

Many types of symbols for package labeling are nationally and internationally standardized. For consumer packaging, symbols exist for product certifications (such as

the FCC and TÜV marks),trademarks, proof of purchase, etc. Some requirements and symbols exist to communicate aspects of consumer rights and safety, for example the CE marking or the estimated sign that notes conformance to EU weights and measures accuracy regulations. Examples of environmental and recycling symbols include the recycling symbol, the recycling code (which could be a resin identification code), and the"Green Dot". Food packaging may show food contact material symbols. In the European Union, products of animal origin which are intended to be consumed by humans have to carry standard, oval-shaped EC identification and health marks for food safety and quality insurance reasons.

Bar codes, Universal Product Codes, and RFID labels are common to allow automated information management in logisticsand retailing. Country of Origin Labeling is often used. Some products might use QR codes or similar matrix barcodes. Packaging may have visible registration marks and other printing calibration/troubleshooting cues.

Packaging machines

A choice of packaging machinery includes: technical capabilities, labor requirements, worker safety,maintainability, serviceability, reliability, ability to integrate into the packaging line, capital cost, floorspace, flexibility (change-over, materials, etc.), energy usage, quality of outgoing packages, qualifications (for food, pharmaceuticals, etc.), throughput, efficiency, productivity, ergonomics, return on investment, etc.

Packaging machinery can be:

1. purchased as standard, off-the-shelf2. purchased custom-made or custom-tailored to specific operations3. manufactured or modified by in-house engineers and maintenance staff

Efforts at packaging line automation increasingly use programmable logic controllers and robotics.

Packaging machines may be of the following general types:

Accumulating and Collating Machines Blister packs, skin packs and Vacuum Packaging Machines Bottle caps equipment, Over-Capping, Lidding, Closing, Seaming and Sealing Machines Box, Case and Tray Forming, Packing, Unpacking, Closing and Sealing Machines Cartoning machines Cleaning, Sterilizing, Cooling and Drying Machines Coding, Printing, Marking, Stamping, and Imprinting Machines

Converting Machines Conveyor belts, Accumulating and Related Machines Feeding, Orienting, Placing and Related Machines Filling Machines: Handling dry, powered, solid, liquid, gas, or viscous products Inspecting: visual, sound, metal detecting, etc. Label dispenser Orienting, Unscrambling Machines Package Filling and Closing Machines Palletizing, Depalletizing, Unit load assembly Product Identification: labeling, marking, etc. Sealing Machines: Heat sealer Slitting Machines: Weighing Machines: Check weigher, multihead weigher Wrapping machines: Stretch wrapping, Shrink wrap, Banding Form, Fill and Seal Machines Other specialty machinery: slitters, perforating, laser cutters, parts attachment, etc.

 UNIT- 5

Developing price strategies and programs – setting the price – adapting the price- managing advertising- developing and managing an advertising program- deciding on media- sales promotional – direct marketing.

SETTING THE PRICE

When setting the price of a new product, marketers must consider the competition’s prices, estimated consumer demand, costs, and expenses, as well as the firm’s pricing objectives and strategies.Here are the steps on how to set a price for your products:Step 1: Determine Pricing Objectives. What is your purpose in setting a price for your product? Do you want to increase sales volume or sales revenue? Establish prestigious image for your product and your company? Increase your market share and market position? Answering these questions will help you keep your prices in line with other marketing decisions.Step 2: Study Costs. Since the main reason for being in business is to make a profit, give careful consideration to the costs involved in making or acquiring the goods or services you will offer for sale. Determine whether and how you can reduce costs without affecting the quality or image of your product. This is so true for a company that quality product is the main service. For instance, a digital printing service shop can higher their price in their postcard printing service if it really has higher quality compared to others.Step 3: Estimate Demand. Employ market research techniques to estimate consumer demand. The key to pricing goods and services is to set prices at the level consumers expect to pay. In many cases, those prices are directly related to demand.

Step 4: Study Competition. Investigate your competitors to see what prices they are charging for similar goods and services. Study the market leader. What is the range of prices from the ceiling price to the price floor? Will you price your goods lower than, equal to, or higher than your competitors?Step 5: Decide on a Pricing Strategy. You may decide to price your product higher than the competition’s because you believe your product is superior. You may decide to set a lower price with the understanding that you will raise it once the product is accepted in the marketplace.Step 6: Set Price. After you have evaluated all the foregoing factors, apply the pricing techniques that match your strategy and set an initial price. Be prepared to monitor that price and evaluate its effectiveness as conditions in the market change.

The price a business charges needs to take account of, and be consistent with, the objectives of the business.

For example, it may be that the objective is to position the business as the highest quality provider – in this case, a higher price should be used to signal high quality to the consumer. Exclusive designer fashion labels and luxury holiday businesses apply this strategy (using “premium” or luxury prices).

At the other end of the pricing scale, a business that positions itself as a low-cost or discount provider will look to set prices that are lower or as low as any rival. The strategy is to gain advantage by offering the lowest prices (not just in the short-term).  The battles in the discount supermarket and low-cost airline markets are great examples of this strategy in action.

Factors to consider when setting priceThere are several factors a business needs to consider in setting the price:

Objectives – what are the marketing objectives of the firm? Competitors – this is really important. Competitor strength  influences whether a

business can set prices independently, or whether it simply has to follow the normal market price

Costs – a business cannot ignore the cost of production or buying a product when it comes to setting a selling price.  In the long-term, a business will fail if it sells for less than cost, or if its gross profit margin is too low to cover the fixed costs of the business

The state of the market for the product – if there is a high demand for the product, but a shortage of supply, then the business can put prices up.

The state of the economy – some products are more sensitive to changes in unemployment and workers wages than others.  Makers of luxury products will need to drop prices especially when the economy is in a downturn

The bargaining power of customers in the target market – who are the buyers of the product? Do they have any bargaining power over the price set?  An individual consumer has little bargaining power over a supermarket (though they can take their custom elsewhere).  However, an industrial customer that buys substantial quantities of a product from a business may be able to negotiate lower or special prices.

Legislation in the market – some businesses operate in markets where prices are regulated by government legislation – e.g. the rail industry

Other elements of the marketing mix – it is important to understand that prices cannot be set without reference to other parts of the marketing mix.  The distribution channels

used will affect price – different prices might be charged for the same product sold direct to consumers or via intermediaries.  The price of a product in the decline stage of its product life-cycle will need to be lower than when it was first launched.

PRICE ADAPTATION STRATEGIES AND MARKETING MANAGEMENT

Price adaptation is the ability of a business to change its pricing models to suit different geographic areas, consumer demands and prevailing incomes. Marketing plays a significant role in price adaptation because pricing strategy is one of the four main components in determining product positioning, which is is how a company chooses to present products to consumers and generate interest. The more adaptability a business has, the better chance it has of appealing to more consumers.Geographic Pricing and Marketing

Geographic pricing relates to how a business chooses to price its products within different regions. This can mean different parts of a particular state, country or even around the globe. In selecting its product prices for different regions, a business also adapts its marketing strategies to fit those pricing models. For example, a company may increase its product prices in areas where median income among consumers is high, and reduce its prices in areas where median income is low. A business may also keep prices low as a means of generating product interest in areas of the country outside its normal target market areas. This allows a company to spread interest for its products across wider geographic areas and ultimately increase sales.Offering Product Discounts

Adapting pricing models to include product discounts is a marketing strategy used to attract bargain hunting consumers and to fend off new competitors attempting to enter target market areas. Product discounts allow marketing management to create short advertising campaigns to stimulate excitement over a company's brands and individual product offerings. Business marketers can also use discounts to create consumer interest in market areas with traditionally lower median incomes. This allows those consumers to try products they might not otherwise be able to afford on a regular basis.Managing Cost and Demand

The cost to create a company's products plays an integral part in how much adaptability the business has with its product pricing. Usually, goods with low production costs have the largest price flexibility because the organization can accept discounted retail prices and still turn a profit. Higher production costs leave less room for a business to adjust its retail price and still recoup costs. To help with price flexibility, marketing managers create advertising campaigns designed to stimulate demand for a company's products. These campaigns emphasize a variety of product aspects to stimulate consumer interest, including pricing points and attractive features.Marketing Product Lines

Creating product lines composed of items with different features and target audiences provides a business with a wide range of price adaptability. The business can create an item to fit each target market area and assign a price to match the median incomes in those areas. Marketing managers within the business can develop promotional campaigns to emphasize the different strengths of these products to various target consumer groups. For example, emphasizing the durability of items within a product line can appeal to consumers who search for

bargains, while pushing the high end features of products can attract consumers who always purchase products from industry leaders.

DECIDING ON MEDIA TIMING AND ALLOCATION

In choosing media, the advertiser faces both a macro-scheduling and micro-scheduling problem. The macro-scheduling problem involves scheduling the advertising in relation to seasons and the business cycle. Suppose 70% of a product’s sales occur between June and September. The firm can vary its advertising expenditures to follow the seasonal pattern, to oppose the seasonal pattern, or to be constant throughout the year.

The micro-scheduling problem calls for allocating advertising expenditures within a short period to obtain maximum impact. Suppose the firm decides to buy 30 radio spots in the month of September. The left side shows that advertising messages for the month can be concentrated (“burst†advertising), dispersed continuously throughout the month, or dispersed� intermittently. The top side shows that the advertising messages can be beamed with a level, rising falling or alternating frequency.

The most effective pattern depends on the communications objectives in relation to the nature of the product, target customers, distribution channels, and other marketing factors. The timing pattern should consider three factors. Buyer turnover expresses the rate at which new buyers enter the market; the higher this rate, the more continuous the advertising should be. Purchase frequency is the number of times during the period that the average buyer buys the product; the higher the purchase frequency, the more continuous the advertising should be. The forgetting rate is the rate at which the buyer forgets the brand; the higher the forgetting rate, the more continuous the advertising should be.

In launching a new product, the advertiser has to choose among continuity, concentration, flighting and pulsing.* Continuity is achieved by scheduling exposures evenly throughout a given period. Generally, advertisers use continuous advertising in expanding market situations, with frequently purchased items and in tightly defined buyer categories.* Concentration calls for spending all the advertising dollars in a single period. This makes sense for products with one selling season or holiday.* Flighting calls for advertising for a period, followed by a period with no advertising, followed by a second period of advertising activity. It is used when funding is limited, the purchase cycle is relatively infrequent, and with seasonal items.* Pulsing is continuous advertising at low-weights levels reinforced periodically by waves of heavier activity. Pulsing draws on the strength of continuous advertising and flights to create a compromise scheduling strategy. Those who favor pulsing believe that the audience will learn the message more thoroughly, and money can be saved.

A company has to decide how to allocate its advertising budget over space as well as over time. The company when it places ads on national TV network or in nationally circulated magazines. It makes when it buys TV time in just a few markets or in regional editions of magazines. These markets are called areas of dominant influences (ADIs) or designated

marketing areas (DMAs). Ads reach a market 40 to 60 miles from a city center. The company makes when it advertises in local newspapers, radio, or outdoor sites.

DEVELOPING AND MANAGING AN ADVERTISING PROGRAM 

Advertising is called direct communication with customers

According to Phillip Kotler: advertising is the paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor.

Mission: It states the objectives of the advertising. It also includes the sales goals of the company.Money: It gives an idea that how much money should be spent by the company for the advertisement. Factors to be considered for this are stage of product life cycle, market share and consumer base, competition, advertisement frequency and product substitutability.Message: Message includes what message should be spent in advertisement. It includes message generation, message evaluation and selection, message execution and social responsibility review.

Media: It includes which media should be used for the advertisement. It also includes reach, frequency, impact of the advertisement. It also contains major media types, media vehicles, media timing and geographical media allocation.Measurement: it is nothing but evaluation of the results. It measures communication impact and sales impact by an advertisement.

SETTING THE OBJECTIVES

1) Informative advertising :The prime objective of the advertising is to inform the existing and potential customers about the product.2) Persuasive advertising:It aims to create liking preference, conviction and purchase of a product or service. Persuasion will create demand of the product.3) Reminder advertising:It aims to simulate repeat purchase of products and services.This will remind the customers that the product may be needed in the near future.4) Reinforcement advertising:It aims to convince current purchases that they made the right choice.

DECIDING ON THE ADVERTISING BUDGET.

After determining advertising objectives the company next sets its advertising budget for each product.Specific factors that should be considered when setting the advertising budget.

1) Stage in the product life cycle:

New products typically need large advertising Budgets to build awareness and to gain consumer trial. Mature brands usually require lower budgets as the ratio to sales.

2) Market share and consumer base:High market share brands usually needs more advertising spending as a person of sales than do low market share brands. Building the market or taking share from competitor requires larger advertising spending than does simply maintaining current share.

3) Competition and clutter :In a market with many competitors and high advertising spending, a brand must advertise more heavily to be notices above the noise in the market.

4) advertising frequency:when many repetitions are needed to present the brand’s message to consumers, the advertising budget must be larger.

5) Product substitutability:A brand that closely resembles other brands in its product class requires heavy advertising to set it apart. When the product differs greatly from competitors, advertising can be used to point out the differences to consumers. 

DEVELOPING THE ADVERTISING CAMPAIGN

In designing and evaluating an ad campaign, it is important to distinguish the message strategy or positioning of an ad from its creative strategy.

Message generation and evaluation

A large advertising budget does not guarantee a successful advertising campaign. No matter how big the budget, advertising can succeed only if commercials gain attention and communicate well.

Today’s advertising messages must be better planned, more imaginative, more entertaining and more rewarding to consumers to gain and hold attention. Creative strategy will play an increasingly important role in advertising success.

Effective message strategy begins with identifying customer benefits that can be used as advertising appeals. Advertising appeals should have three characteristics:+Meaningful, Believable and Distinctive.

Creative Development and Execution

The impact of the message depends not only on what is said but also on how it is said. Any message can be presented in different execution styles. Message execution can be decisive. They can be following advertising medium for execution:

Television Ads: It is generally acknowledge as the most powerful advertising medium. Properly designed and executed TV ads can improve brand equity and affect sales and profits.

Print Ads: It offer a stark contrast to broadcast media. In general there are two main print media: Magazines and Newspaper.

Radio Ads: It is cheaper than television. Radio listening is expected to increase significantly over the coming years. Radio Ads can be extremely creative. Creative devices can tap into the listeners imagination to create powerfully relevant and popular images.

Film Ads: India is the largest producer of films in the world. Many local firms use this medium to advertise their products and services as this minimizes the spillage and the wastage of advertisement money.

SOCIAL RESPONSIBILITY REVIEW:Advertiser and their agencies must be sure advertising does not over step social and legal norms. Public policy makers have developed a substantial body of lows and regulations to govern advertising.

DECIDING ON MEDIA AND MEASURING EFFECTIVENESS:

After choosing the message, the advertiser’s next task is to chose media to carry it. Major steps in media selection are as under:

1) Deciding on reach, frequency, and impact:Reach is a measure of the percentage of people in the target market who are exposed to the ad campaign during a given period of time.Frequency is a measure of how many times the average percent in the target market is exposed to the message.The advertiser must also decide on the desired media impact-the qualitative value of a message exposure through a given medium.

2) Choosing among major media types:The major media types are newspapers, televisions, direct mail, radio, magazines, outdoor and online. The media habits of the target consumers will affect media choice. Advertisers look for media that reach target consumers effectively. Different types of messages may require different media. Cost is another major factor in media choice. The media planner looks at the total cost of using a medium. Media impact an cost must be reexamined regularly. As a result, advertisers are increasingly turning to alternative media, ranging from cable television and outdoor advertising to parking meters and shopping cards.

3) Selecting specific vehicles:The media planner now must chose the best media vehicles and specific media within each general media type, media planners must complete the cost per thousand percents reached by a

vehicle. The media planners must also consider the cost of producing ads for different media. Whereas, newspaper ads may cost very little to produce flashy television ads may cost millions.

4) Deciding on media timing and allocation:The advertiser must also decide how to schedule the advertising over the course of a year. The firm can vary its advertising to follow the seasonal pattern, or to be the same all year. Most firms do some seasonal advertising. The advertiser has to chose the pattern of the ads. The idea is to advertise heavily for a short period to build awareness that carries over to the next advertising period.

EVALUATING ADVERTISING EFFECTIVENESS:Good planning and control of advertising depend on measures of advertising effectiveness. Most advertisers try to measure the communication effect of an ad-that is, its potential effect on awareness, knowledge, or preferences.

Communication-Effect Research:It seeks to determine whether an ad is communicating effectively. There are three major methods of pre testing.

CONSUMER FEEDBACK METHOD:Ask the consumers for their reactions to a proposed ad. 

PORTFOLIO TEST:It ask consumers to view or listen to a portfolio of advertisements. Consumers are than asked to recall all the ads on their contains, aided or unaided by the interviewer.

LABORATORY TEST:It use equipment to measure physiological reactions like heartbeat, blood pressure, perspiration to an ad; or consumers may be ask to turn a knob to indicate their moment to moment liking or interest while viewing sequence material.

Sales Effect Research:Advertising’s sales effect is generally harder to measure than its communication effects. Sales are influenced by many factors such as features, price and availability as well as competitors actions.

Formula for measuring the sales impact of advertising:

1.) Share of Expenditure

2.) Share of voice

3.) Share of Mind and Heart

4.) Share of Market

SALES PROMOTION

Sales Promotion consists of short-term incentives to encourage purchase or sales of the product or service. Whereas advertising offers reasons to buy a product or service, sales promotion offers reasons to buy now.

Sales promotion includes tools for:+ Consumer promotion+ Trade Promotion+ Business and Sales- force promotion.

OBJECTIVESSales promotion tools vary in their specific objectives.Sales promotions should be consumer relationship building. They should help to reinforce the product’s position and build long-term relationships with consumers. Even price promotions can be designed to help build customer relationships.

MAJOR DECISIONSIn using sales promotion, a company must establish its objectives, select the tools, develop the program, pretest the program, implement and control it, and evaluate the results.

ESTABLISHING OBJECTIVESSales promotion objectives are derived from broader promotion objectives, which are derived from more basic marketing objectives developed for the product. For consumers, objectives include encouraging purchase of larger-sized units, and long term brand equity effects.For the sales force, objectives include encouraging support of a new product or model, encouraging more prospecting, and stimulating off season sales.

SELECTING CONSUMER PROMOTION TOOLSThe main consumer promotion tools include samples, coupons, cash refunds, premiums, advertising specialties, patronage rewards, point of purchase, displays and demonstrations and contests, sweepstakes and games.

SELECTING CONSUMER PROMOTION TOOLSMore sales promotions are directed to retailers and wholesalers than to consumers. Trade promotion can persuade retailers or wholesalers to carry a brand, to give it shelf space, to promote it in advertising, and push it to consumers.

Manufacturers use several trade promotion tools. Many tools are used for consumer promotions

contests, premiums, displays can also be used as trade promotions. Or the manufacturer may offer a straight discount off the list price on each case purchased during a stated period of time. Dealers can use the discount for immediate profit, for advertising or for price reductions to their customers.

Manufacturers also offer an allowance in return for the retailer’s agreement to feature the manufacturer’s products in some way. Manufacturers may offer free goods, which are extra cases of merchandise, to resellers who buy a certain quantity or who feature a certain flavor or size.

SELECTING BUSINESS AND SALES FORCE PROMOTION TOOLS

Companies spend large amounts of money on business and sales force promotion tools. These tools are used to gather business leads, impress and reward customers, and motivate the sales force to greater effort. Companies typically develop budgets for each business promotion tool that remain fairly constant from year to year.

DEVELOPING THE PROGRAMIn planning sales promotion programs, marketers are increasingly blending several media into a total campaign concept. In deciding to use a particular incentive, marketers have several factors to consider:+ size of the incentive+ conditions for participation+ duration of the promotion+ distribution vehicle+ timing of the promotion+ total sales promotion budget.

PRETESTING, IMPLEMENTING, CONTROLLING, AND EVALUATING THE PROGRAM.Although most sales promotion programs are designed on the basis of experience, pretests can determine if the tools are appropriate, the incentive size optimal, and the presentation method efficient. Consumers can be asked to rate or rank different possible deals, or trial tests can run in limited geographic areas.

Marketing managers must prepare implementation and control plans that cover lead time and sell-in time for each individual promotion.

Manufacture can evaluate the program using three methods:

+ sales data

+ consumer surveys and 

+ experiments.

EVENTS AND EXPERIENCES

EVENTS OBJECTIVESMarketers report a number of reasons why they sponsor events:1) to identify with a particular target market or life style2) to increase awareness of company or product name3) to create reinforce consumer perceptions of key brand image associations4) to enhance corporate image dimensions.5) to create experiences and evoke feelings6) to express commitment to the community or on social issues.7) to entertain key clients or reward key employees.8) to permit merchandising or promotional opportunities.

MAJOR DECISIONSDeveloping successful sponsored events involves choosing the appropriate events; designing the optimal sponsorship program for the event; and measuring the effects of sponsorship.

CHOOSING EVENT OPPORTUNITIESBecause of the huge amount of money involved and the number of event opportunities that exist, many marketers are becoming much more strategic about the events with which they will get involved and the manner in which they will do so.An ideal event might be one :1) whose audience closely matches the desired target market2) that generates much favorable attention3) that is unique but not encumbered with many sponsors4) that lends itself to ancillary marketing activities5) that reflects or enhances the brand or corporate image of the sponsor

DESIGNING SPONSORSHIP PROGRAMSA sponsor can strategically identify itself at an event in a number of ways, including banners, signs and programs. At least two to three times the amount of the sponsorship expenditure should be spent on related marketing activities.

MEASURING SPONSORSHIP ACTIVITIESAs with public relations measurement of events is difficult.There are two basic approaches to measuring the effects of sponsorship activities:+ the supply side method : it focuses on potential exposure to the brand by assessing the extent of media coverage.+ the demand- side method: It focuses on reported exposure from consumer. 

PUBLIC RELATIONS

Public relations is building good relations with the company’s various publics by obtaining favorable public, building up a good corporate image, and handling or heading off unfavorable rumors, stories, and events. Public relations departments may perform any or all of the following functions.

+ Press relations or press agency

+ Product publicity

+ public affairs

+lobbying

+ investor relations

+ development

MARKETING PUBLIC RELATIONS

MPR, like financial PR and community PR, serves a special constituency, the marketing department.

The old name for MPR was publicity.

MPR is also effective in blanketing local communities and reaching specific groups. Managers must acquire more skill in using MPR. 

MAJOR DECISIONS IN MARKETING

In considering when and how to use MPR, management must establish the marketing objectives, choose the PR messages and vehicles, implement the plan carefully, and evaluate the results. The main tools of MPR are described as under :

+ Publications

+ Events

+ Sponsorship

+ News

+ Speeches

+ Public- service activities

+ Identify Media

ESTABLISHING OBJECTIVES

MPR can build awareness by placing stories in the media to bring attention to a product, service, person, organization, or idea. It can hold down the promotion cost because MPR costs less than direct- mail and media advertising.MPR is increasingly borrowing the techniques and technology of direct- response marketing to reach target audience members one-on-one.

CHOOSING MESSAGES ANS VEHICLES

The MPR manager must identify or develop interesting stories about the product. PR ideas include hosting major academic conventions, inviting expert or celebrity speakers, and developing news conferences. Each event is an opportunity to develop a multitude of stories directed at different audiences.

IMPLEMENTING THE PLAN AND EVALUATING RESULTS

MRP’s contribution to the bottom line is difficult to measure, because it is used along with other promotional tools. The three most commonly used measures of MPR effectiveness are number of exposures; awareness, comprehension, or attitude change; and contribution to sales and profits.Advertisements

SALES PROMOTION

o Sales promotion is one of the five aspects of the promotional mix. (The other 4 parts of the promotional mix are advertising,personal selling, direct marketing and publicity/public relations.) Media and non-media marketing communication are employed for a pre-determined, limited time to increase consumer demand, stimulate market demand or improve product availability. Examples include contests, coupons, freebies, loss leaders, point of purchase displays, premiums, prizes, product samples, and rebates

o Sales promotions can be directed at either the customer, sales staff, or distribution channel members (such as retailers). Sales promotions targeted at the consumer are called consumer sales promotions. Sales promotions targeted at retailers andwholesale are called trade sales promotions. Some sale promotions, particularly ones with unusual methods, are consideredgimmicks by many.

o Sales promotion includes several communications activities that attempt to provide added value or incentives to consumers, wholesalers, retailers, or other organizational customers to stimulate immediate sales. These efforts can attempt

to stimulate product interest, trial, or purchase. Examples of devices used in sales promotion include coupons, samples, premiums, point-of-purchase (POP) displays, contests, rebates, and sweepstakes.

o Sales promotion is needed to attract new customers, to hold present customers, to counteract competition, and to take advantage of opportunities that are revealed by market research. It is made up of activities, both outside and inside activities, to enhance company sales. Outside sales promotion activities include advertising, publicity, public relations activities, and special sales events. Inside sales promotion activities includes window displays, product and promotional material display and promotional programs such as premium awards and contests.

o CONSUMER SALES PROMOTION TECHNIQUES

• Price deal: A temporary reduction in the price, such as 50% off.• Loyal Reward Program: Consumers collect points, miles, or credits for purchases and

redeem them for rewards.• Cents-off deal: Offers a brand at a lower price. Price reduction may be a percentage

marked on the package.• Price-pack deal: The packaging offers a consumer a certain percentage more of the

product for the same price (for example, 25 percent extra).• Coupons: coupons have become a standard mechanism for sales promotions.• Loss leader: the price of a popular product is temporarily reduced below cost in order to

stimulate other profitable sales• Free-standing insert (FSI): A coupon booklet is inserted into the local newspaper for

delivery.• On-shelf couponing: Coupons are present at the shelf where the product is available.• Checkout dispensers: On checkout the customer is given a coupon based on products

purchased.• On-line couponing: Coupons are available online. Consumers print them out and take

them to the store.• Mobile couponing: Coupons are available on a mobile phone. Consumers show the offer

on a mobile phone to a salesperson for redemption.• Online interactive promotion game: Consumers play an interactive game associated with

the promoted product.• Rebates: Consumers are offered money back if the receipt and barcode are mailed to the

producer.• Contests/sweepstakes/games: The consumer is automatically entered into the event by

purchasing the product.• Point-of-sale displays:-• Aisle interrupter: A sign that juts into the aisle from the shelf.• Dangler: A sign that sways when a consumer walks by it.• Dump bin: A bin full of products dumped inside.• Bidding portals: Getting prospects• Glorifier: A small stage that elevates a product above other products.• Wobbler: A sign that jiggles.• Lipstick Board: A board on which messages are written in crayon.

• Necker: A coupon placed on the 'neck' of a bottle.• YES unit: "your extra salesperson" is a pull-out fact sheet.• Electroluminescent: Solar-powered, animated light in motion.[2]

• Kids eat free specials: Offers a discount on the total dining bill by offering 1 free kids meal with each regular meal purchased.

• Sampling: Consumers get one sample for free, after their trial and then could decide whether to buy or not.

TRADE SALES PROMOTION TECHNIQUES

• Trade allowances: short term incentive offered to induce a retailer to stock up on a product.

• Dealer loader: An incentive given to induce a retailer to purchase and display a product.• Trade contest: A contest to reward retailers that sell the most product.• Point-of-purchase displays: Used to create the urge of "impulse" buying and selling your

product on the spot.• Training programs: dealer employees are trained in selling the product.• Push money: also known as "spiffs". An extra commission paid to retail employees to

push products.• Trade discounts (also called functional discounts): These are payments to distribution

channel members for performing some function .• Retail Mechanics• Retailers have a stock number of retail 'mechanics' that they regularly roll out or rotate

for new marketing initiatives.• Buy x get y free a.k.a. BOGOF for Buy One Get One Free• Three for two• Buy a quantity for a lower price• Get x% of discount on weekdays.• Free gift with purchase

POLITICAL ISSUESSales promotions have traditionally been heavily regulated in many advanced industrial

nations, with the notable exception of the United States. For example, the United Kingdomformerly operated under a resale price maintenance regime in which manufacturers could legally dictate the minimum resale price for virtually all goods; this practice was abolished in 1964.

Most European countries also have controls on the scheduling and permissible types of sales promotions, as they are regarded in those countries as bordering upon unfair business practices. Germany is notorious for having the most strict regulations. Famous examples include the car wash that was barred from giving free car washes to regular customers and a baker who could not give a free cloth bag to customers who bought more than 10 rolls.

DIRECT MARKETING

Direct marketing is a channel-agnostic form of advertising which allows businesses and

nonprofit organizations to communicate straight to the customer, with advertising techniques that

can include cell phone text messaging, email, interactive consumer websites, online display

ads, database marketing, fliers, catalog distribution, promotional letters, targeted television

commercials, response-generating newspaper/magazine advertisements, and outdoor advertising.

Amongst its practitioners, it is also referred to as Direct Response.

Direct marketing messages emphasize a focus on the customer, data, and accountability.

Hence, besides the actual communication, creation of actionable segments, pre- and post-

campaign analytics, and measurement of results, are integral to any good Direct Marketing

campaign. Characteristics that distinguish direct marketing are:

A database of names (prospects, customers, businesses, etc.), often with certain other

relevant information such as contact number/address, demographic information, purchase

habits/history, company history, etc., is used to develop a list of targeted entities with some

existing common interests, traits or characteristics. Generating such a database is often

considered part of the Direct Marketing campaign.

Marketing messages are addressed directly to this list of customer and/or prospects. Direct

marketing relies on being able to address the members of a target market. Addressability

comes in a variety of forms including email addresses, phone numbers, Web browser

cookies, fax numbers and postal addresses.

Direct marketing seeks to drive a specific "call to action." For example, an advertisement

may ask the prospect to call a free phone number, mail in a response or order, or click on a

link to a website.

Direct marketing emphasizes trackable, measurable responses, results and costs from

prospects and/or customers—regardless of medium.

Direct marketing is practiced by businesses of all sizes—from the smallest start-up to the

leaders on the Fortune 500. A well-executed direct advertising campaign can prove a positive

return on investment by showing how many potential customers responded to a clear call-to-

action. General advertising eschews calls-for-action in favor of messages that try to build

prospects’ emotional awareness or engagement with a brand. Even well-designed general

advertisements rarely can prove their impact on the organization’s bottom line. The

demonstrable result of Direct Marketing is the reason for its increasing popularity.

Popularity

A recent study  by the Direct Marketing Association reports that in 2010, marketers—

commercial and nonprofit—spent $153.3 billion on direct marketing, which accounted for 54.2%

of all ad expenditures in the United States. Measured against total US sales, these advertising

expenditures generated approximately $1.798 trillion in incremental sales. In 2010, direct

marketing accounted for 8.3% of total US gross domestic product. In 2010, there were 1.4

million direct marketing employees in the US. Their collective sales efforts directly supported

8.4 million other jobs, accounting for a total of 9.8 million US jobs.

History

Mail order pioneer Aaron Montgomery Ward knew that using the technique of selling

products directly to the customer at appealing prices could, if executed effectively and

efficiently, revolutionize the market industry and therefore be used as an innovative model for

marketing products and creating customer loyalty.[2] The term "direct marketing" was coined

long after Montgomery Ward's time.

In 1872, Aaron Montgomery Ward produced the first mail-order catalog for

his Montgomery Ward mail order business. By buying goods and then reselling them directly to

customers, Ward was consequently removing the middlemen at the general store and, to the

benefit of the customer, drastically lowering the prices. The Direct Mail Advertising Association,

predecessor of the present-day Direct Marketing Association, was first established in 1917. Third

class bulk mail postage rates were established in 1928.

In 1967, Lester Wunderman identified, named, and defined the term "direct marketing".

Wunderman—considered to be the father of contemporary direct marketing—is behind the

creation of the toll-free 1-800 numberand numerous loyalty marketing programs including the

Columbia Record Club, the magazine subscription card, and the American Express Customer

Rewards program.

Benefits

Direct marketing is attractive to many marketers because its positive results can be

measured directly. For example, if a marketer sends out 1,000 solicitations by mail and 100

respond to the promotion, the marketer can say with confidence that campaign led directly to

10% direct responses. This metric is known as the 'response rate,' and it is one of many clearly

quantifiable success metrics employed by direct marketers. In contrast, general advertising uses

indirect measurements, such as awareness or engagement, since there is no direct response from

a consumer.

Measurement of results is a fundamental element in successful direct marketing. The

Internet has made it easier for marketing managers to measure the results of a campaign. This is

often achieved by using a specific website landing page directly relating to the promotional

material. A call to action will ask the customer to visit the landing page, and the effectiveness of

the campaign can be measured by taking the number of promotional messages distributed (e.g.,

1,000) and dividing it by the number of responses (people visiting the unique website page).

Another way to measure the results is to compare the projected sales or generated leads for a

given term with the actual sales or leads after a direct advertising campaign.

Challenges and solutions

While many marketers recognize the financial benefits of increasing targeted awareness, some

direct marketing efforts using particular media have been criticized for generating poor quality

leads, either due to poor message strategy or because of poorly compiled demographic databases.

This poses a problem for marketers and consumers alike, as advertisers do not wish to waste

money on communicating with consumers not interested in their products.

Success of any Direct Marketing campaign, in terms of number of times the desired response

may vary between the best vs. the worst of the following parameters, depends on:

List or targeting (best targeting may yield up to 6 times the response, as compared with the

worst targeting)

Offer (best offer may yield up to 3 times the response, as compared with the worst offer)

Timing (best timing for the campaign may yield up to 2 times the response, as compared

with the worst timing)

Ease of response (best/multiple ways offered to respond may yield up to 1.35 times the

response, as compared with not-so-friendly response mechanism/s)

Creativity (most creative messaging may yield up to 1.2 times the response, as compared to

the least creative messaging)

Media employed. The medium/media used to deliver a message can have a significant

impact on responses. It's difficult to truly personalize a DRTV or radio message. One can

even attempt to send a personalized message via email or text message, but a high quality

direct mail envelope and letter will typically have a better chance of generated a response in

this scenario.

In sum, choosing the best of all the above parameters may yield up to 58 times more

response, as compared to choosing the worst of the above parameters. Addressing these helps

assuage the concerns of the marketers.

Some of these concerns have been addressed by direct marketers by the use of individual

"opt-out" lists, variable printing, and better-targeted list practices. Additionally, in order to avoid

unwanted mailings, members of the marketing industry have established preference services that

give customers more control over the marketing communications they receive in the mail.

The term "junk mail," referring to unsolicited commercial ads delivered via post office or

directly deposited in consumers' mail boxes, can be traced back to 1954. The term "spam,"

meaning "unsolicited commercial e-mail," can be traced back to March 31, 1993, although in its

first few months it merely referred to inadvertently posting a message so many times

on UseNet that the repetitions effectively drowned out the normal flow of conversation.

To address the concerns of unwanted emails or spam, in 2003, The US Congress enacted

the Controlling the Assault of Non-Solicited Pornography and Marketing (CAN-SPAM) Act to

curb unwanted email messages. Can-Spam gives recipients the ability to stop unwanted emails,

and set out tough penalties for violations.[8] Additionally, ISPs and email service providers have

developed increasingly effective Email Filtering programs. These filters can interfere with the

delivery of email marketing campaigns, even if the person has subscribed to receive them, [9] as

legitimate email marketing can possess the same hallmarks as spam. There are a range of email

service providers that provide services for legitimate opt-in emailers to avoid being classified as

spam.

Consumers have expressed concerns about the privacy and environmental implications of

direct marketing. In response to consumer demand and increasing business pressure to increase

the effectiveness of reaching the right customer with direct marketing, companies specialize in

targeted direct advertising to great effect, reducing advertising budget waste and increasing the

effectiveness of delivering a marketing message with better geo-demography information,

delivering the advertising message to only the customers interested in the product, service, or

event on offer. Additionally, members of the advertising industry have been working to adopt

stricter codes regarding online targeted advertising.

Channels

Any medium that can be used to deliver a communication to a customer can be employed

in direct marketing, including:

Email marketing

Sending marketing messages through email or email marketing is one of the most widely

used direct-marketing methods. One reason for email marketing's popularity is that it is relatively

inexpensive to design, test, and send an email message. It also allows marketers to deliver

messages around the clock, and to accurately measure responses.

Online tools

With the expansion of digital technology and tools, direct marketing is increasingly taking

place through online channels. Most online advertising is delivered to a focused group of

customers and has a trackable response.

Display Ads are interactive ads that appear on the Web next to content on Web pages or Web

services. Formats include static banners, pop ups, videos, and floating units. Customers can

click on the ad to respond directly to the message or to find more detailed information.

According to research by eMarketer, expenditures on online display ads rose 24.5% between

2010 and 2011.

Search: 49% of US spending on Internet ads goes to search, in which advertisers pay for

prominent placement among listings in search engines whenever a potential customer enters

a relevant search term, allowing ads to be delivered to customers based upon their already-

indicated search criteria.This paid placement industry generates more than $10 billion for

search companies. Marketers also use search engine optimization to drive traffic to their

sites.

Social Media Sites, such as Facebook and Twitter, also provide opportunities for direct

marketers to communicate directly with customers by creating content to which customers

can respond.Mobile

Through mobile marketing, marketers engage with prospective customers and donors in an

interactive manner through a mobile device or network, such as a cellphone, smartphone, or

tablet. Types of mobile marketing messages include: SMS (short message service)—marketing

communications are sent in the form of text messages, also known as texting. MMS (multi-media

message service)—marketing communications are sent in the form of media messages.

In October 2013, the Federal Telephone Consumers Protection Act made it illegal to contact an

individual via cell phone without prior express written consent for all telephone calls using an

automatic telephone dialing system or a prerecorded voice to deliver a telemarketing message to

wireless numbers and residential lines. An existing business relationship does not provide an

exception to this requirement.

Mobile Applications: Smartphone-based mobile apps contain several types of

messages. Push Notifications are direct messages sent to a user either automatically or as part of

a campaign. They include transactional, marketing, geo-based, and more. Rich Push

Notifications are full HTML Push Notifications. Mobile apps also contain Interactive ads that

appear inside the mobile application or app; Location-Based Marketing: marketing messages

delivered directly to a mobile device based on the user's location; QR Codes (quick-response

barcodes): This is a type of 2D barcode with an encoded link that can be accessed from a

smartphone. This technology is increasingly being used for everything from special offers to

product information. Mobile Banner Ads: Like standard banner ads for desktop Web pages but

smaller to fit on mobile screens and run on the mobile content network

Telemarketing

Another common form of direct marketing is telemarketing, in which marketers contact

customers by phone. The primary benefit to businesses is increased lead generation, which helps

businesses increase sales volume and customer base. The most successful telemarketing service

providers focus on generating more "qualified" leads that have a higher probability of getting

converted into actual sales.

In the United States, the National Do Not Call Registry was created in 2003 to offer

consumers a choice whether to receive telemarketing calls at home. The FTC created the

National Do Not Call Registry after a comprehensive review of the Telemarketing Sales Rule

(TSR). The do-not-call provisions of the TSR cover any plan, program, or campaign to sell

goods or services through interstate phone calls.

The 2012 modification, which went into effect on October 16, 2013, stated that prior

express written consent will be required for all autodialed and/or pre-recorded calls/texts

sent/made to cell phone; and for pre-recorded calls made to residential land lines for marketing

purposes.

Further, a consumer who does not wish to receive further prerecorded telemarketing calls

can "opt out" of receiving such calls by dialing a telephone number (required to be provided in

the prerecorded message) to register his or her do-not-call request. The provisions do not cover

calls from political organizations or charities.[15]

Canada has its own National Do Not Call List (DNCL). In other countries it is voluntary,

such as the New Zealand Name Removal Service.

Voicemail marketing

Voicemail marketing emerged from the market prevalence of personal voice mailboxes,

and business voicemail systems. Voicemail marketing presented a cost effective means by which

to reach people directly, by voice. Abuse of consumer marketing applications of voicemail

marketing resulted in an abundance of "voice-spam," and prompted many jurisdictions to pass

laws regulating consumer voicemail marketing. More recently, businesses have utilized guided

voicemail (an application where pre-recorded voicemails are guided by live callers) to

accomplish personalized business-to-business marketing formerly reserved for telemarketing.

Because guided voicemail is used to contact only businesses, it is exempt from Do Not Call

regulations in place for other forms of voicemail marketing.

Voice-mail courier is a similar form of voice-mail marketing with both business-to-

business and business-to-consumer applications.

Broadcast faxing

Broadcast faxing, in which faxes are sent to multiple recipients, is now less common than

in the past. This is partly due to laws in the United States and elsewhere which regulate its use

for consumer marketing. In 2005, President Bush signed into law S.714, the Junk Fax Prevention

Act of 2005 (JFPA), which allows marketers to send commercial faxes to those with whom they

have an established business relationship (EBR), but imposes some new requirements. These

requirements include providing an opt-out notice on the first page of faxes and establishing a

system to accept opt-outs at any time of the day. Roughly 2% of direct marketers use fax, mostly

for business-to-business marketing campaigns.[16]

Couponing

Couponing is used in print and digital media to elicit a response from the reader. An

example is a coupon which the reader receives through the mail and takes to a store's check-out

counter to receive a discount.

Digital Coupons: Manufacturers and retailers make coupons available online for electronic

orders that can be downloaded and printed. Digital coupons are available on company websites,

social media outlets, texts, and email alerts. There are an increasing number of mobile phone

applications offering digital coupons for direct use.

Daily Deal Sites offer local and online deals each day, and are becoming increasingly popular.

Customers sign up to receive notice of discounts and offers, which are sent daily by email.

Purchases are often made using a special coupon code or promotional code. The largest of these

sites, Groupon, has over 83 million subscribers.

Direct response marketing

Direct Response Marketing is designed to generate an immediate response from consumers,

where each consumer response (and purchase) can be measured, and attributed to individual

advertisements.[18] This form of marketing is differentiated from other marketing approaches,

primarily because there are no intermediaries such as retailers between the buyer and seller, and

therefore the buyer must contact the seller directly to purchase products or services. Direct-

response marketing is delivered through a wide variety ofmedia, including DRTV, radio, mail,

print advertising, telemarketing, catalogues, and the Internet.

Direct response mail order

Mail order in which customers respond by mailing a completed order form to the marketer. Mail

order direct response has become more successful in recent years due to internet exposure.[19]

Direct response television

Direct marketing via television (commonly referred to as DRTV) has two basic forms: long form

(usually half-hour or hour-long segments that explain a product in detail and are commonly

referred to as infomercials) and short form, which refers to typical 30-second or 60-second

commercials that ask viewers for an immediate response (typically to call a phone number on

screen or go to a website). TV-response marketing—i.e. infomercials—can be considered a form

of direct marketing, since responses are in the form of calls to telephone numbers given on-air.

This allows marketers to reasonably conclude that the calls are due to a particular campaign, and

enables them to obtain customers' phone numbers as targets for telemarketing. One of the most

famous DRTV commercials was for Ginsu Knives by Ginsu Products, Inc. of RI. Several aspects

of ad, such as its use of adding items to the offer and the guarantee of satisfaction were much

copied, and came to be considered part of the formula for success with short-form direct-

response TV ads (DRTV).

Forms of direct response marketing on television include standard short form television

commercials, infomercials and home shopping networks. Short-form direct-response

commercials have time lengths ranging from 30 seconds to 2 minutes. Long form infomercials

are typically 30 minutes long. An offshoot of the infomercial is the home shopping industry. In

this medium, items can potentially be offered with reduced overhead.[20]

Direct response radio

In direct response radio, ads contain a call to action with a specific tracking mechanism. Often,

this tracking mechanism is a "call now" prompt with a toll-free phone number or a unique Web

URL. Results of the ad can be tracked in terms of calls, orders, customers, leads, sales, revenue,

and profits that result from the airing of those ads.

Direct response magazines and newspapers

Magazine and newspaper ads often include a direct response call-to-action, such as a toll-free

number, a coupon redeemable at a brick-and-mortar store, or a QR code that can be scanned by a

mobile device—these methods are all forms of direct marketing, because they elicit a direct and

measurable action from the customer.

Other direct response media

Other media, such as magazines, newspapers, radio, social media, search engine

marketing and e-mail can be used to elicit the response. A survey of large corporations found e-

mail to be one of the most effective forms of direct response.[21]

Direct mail

The term advertising, or direct mail, is used to refer to communications sent to potential

customers or donors via the postal service and other delivery services. Direct mail is sent to

customers based on criteria such as age, income, location, profession, buying pattern, etc. Direct

mail includes advertising circulars, catalogs, free-trial CDs, pre-approved credit card

applications, and other unsolicited merchandising invitations delivered by mail to homes and

businesses. Bulk mailings are a particularly popular method of promotion for businesses

operating in the financial services, home computer, and travel and tourism industries.

In many developed countries, direct mail represents such a significant amount of the total

volume of mail that special rate classes have been established. In the United States andUnited

Kingdom, for example, there are bulk mail rates that enable marketers to send mail at rates that

are substantially lower than regular first-class rates. In order to qualify for these rates, marketers

must format and sort the mail in particular ways—which reduces the handling (and therefore

costs) required by the postal service. In the US, marketers send over 90 billion pieces of direct

mail per year.

Advertisers often refine direct mail practices into targeted mailing, in which mail is sent

out following database analysis to select recipients considered most likely to respond positively.

For example, a person who has demonstrated an interest in golf may receive direct mail for golf-

related products or perhaps for goods and services that are appropriate for golfers. This use of

database analysis is a type of database marketing. The United States Postal Service calls this

form of mail "advertising mail" (admail for short).

Insert media

Another form of direct marketing, insert media are marketing materials that are inserted

into other communications, such as a catalog, newspaper, magazine, package, or bill. Coop or

shared mail, where marketing offers from several companies are delivered via a single envelope,

is also considered insert media.

Out-of-home

Out-of-home direct marketing refers to a wide array of media designed to reach the

consumer outside the home, including billboards, transit, bus shelters, bus benches, aerials,

airports, in-flight, in-store, movies, college campus/high schools, hotels, shopping malls, sport

facilities, stadiums, taxis—that contain a call-to-action for the customer to respond.

Direct selling

Direct selling

Direct selling is the sale of products by face-to-face contact with the customer, either by

having salespeople approach potential customers in person, or through indirect means such

as Tupperware parties.

Grassroots/community marketing

The door-to-door distribution of flyers and leaflets within a local community is a

business-to-consumer form of direct marketing used extensively by restaurants, fast food

companies, and many other business focusing on a local catchment. Similar to direct mail

marketing, this method is targeted purely by area and community, and costs a fraction of the

amount of a mailshot, since it is not necessary to purchase stamps, envelopes, or address lists

with the names of home occupants.